TIP755: My Process for Finding Great Investments w/ Kyle Grieve

Episode Summary

Executive Summary: Kyle Grieve outlines a disciplined, long-term investing philosophy built from painful crypto mistakes, early stock wins, and years of studying great investors. He emphasizes owning businesses, not trading tickers; focusing on quality and microcap inflection opportunities; prioritizing management integrity and intrinsic value growth; and avoiding behavioral traps through patience, low turnover, and quarterly review.

Main Topics: From speculation to disciplined investing (Priority: 5/5): Grieve explains how reckless crypto trading, leverage, technical indicators, and short-term chart watching wiped out most of his capital and forced him toward a more thoughtful, fundamentals-based approach. Return goals, benchmarking, and philosophy (Priority: 5/5): He targets doubling capital every five years, prefers absolute over relative performance, and uses the S&P 500 mainly as a psychological opportunity-cost reference rather than a true target. Two-bucket investment framework (Priority: 5/5): His portfolio is split between quality businesses and microcap inflection-point businesses, each with different sizing, turnover, and evaluation criteria. Business-owner mindset and holding through volatility (Priority: 5/5): He argues that investors should think like owners, not traders, because great businesses can suffer large drawdowns yet still compound value over decades. Management quality and capital allocation (Priority: 4/5): He details a management checklist centered on integrity, alignment, compensation, transparency, and capital efficiency, with integrity treated as non-negotiable. Portfolio management, sizing, and selling rules (Priority: 4/5): He explains how he sizes positions, averages up on winners, avoids trimming, and sells only when thesis breaks, better opportunities appear, or prices run too far ahead of fundamentals. Behavioral edge, competence, and mistake review (Priority: 4/5): He stresses reducing stupidity, auditing assumptions, expanding circle of competence carefully, and learning from both errors of omission and commission.

Key Arguments: Leverage, technical indicators, and short-term speculation can destroy capital quickly; his crypto losses were the catalyst for a fundamental shift. A high ambition target like doubling capital every five years forces selectivity and can lead to rare multi-baggers, but it also increases the danger of overpaying for expectations. Relative benchmarks are secondary; what matters is whether portfolio businesses are compounding intrinsic value at or above the investor's hurdle rate. Investing should be approached as ownership in real businesses, which encourages patience during volatility and discourages panic-selling. Quality businesses should be judged by moats, aligned management, and sustained high ROIC, while microcaps are judged by rapid revenue/EPS inflections plus similar management quality. Management integrity is the most important criterion; if integrity is questionable, he exits rather than hoping the situation improves. Selling is mostly about thesis failure, finding a better opportunity, or valuation getting far ahead of fundamentals; he avoids trimming winners just because they have risen. A strong behavioral process—quarterly review, Bayesian updating, avoiding noise, and reducing impulsive action—can substitute for above-average IQ. Circle of competence is not fixed; investors should expand it deliberately, but only if they are willing to put in the learning time and accept the risk. Mistakes of omission are inevitable; the key is to learn which ideas were understandable with more effort and which ones should have been bought earlier.

Data Points: Annualized portfolio return since 2020: 18.7% - Grieve says his portfolio has returned this annualized rate since 2020. S&P 500 annualized return over same timeframe: 17.8% - Referenced as the comparison benchmark for the same period. Crypto capital loss: 97% - He says he eviscerated about 97% of his crypto assets during his speculative phase. Bitcoin move referenced: $3,000 to $20,000 - Describes Bitcoin's 2017 run as the backdrop for his altcoin speculation. Market decline in March 2020: 23% - A newspaper article about the market sliding triggered his entry into stocks. Goal return hurdle: Double capital every 5 years - This is his stated investing objective and return benchmark. Intrinsic value growth hurdle: 15% - He generally looks for businesses growing intrinsic value or EPS/operating cash flow above this rate. Quality portfolio weight: 63% - As of August 18, 2025, quality businesses made up this share of the portfolio. Microcap growth screen: 2 quarters above 25% - He looks for two quarters of revenue and earnings growth above 25% in microcap inflection ideas. Quality-bucket position sizing: 2% to 3% opening; up to 10% cost basis - Typical starting and full-size allocation for quality businesses. Microcap position sizing: 1% opening; 5% to 6% max cost basis - Typical sizing for microcap inflection positions. Largest position size: 28% - He says one position reached this as the largest absolute portfolio weight he has ever had. Drawdowns cited for Berkshire Hathaway: Three 40% drawdowns since 1990 - Used to illustrate that great compounders can be extremely volatile. Drawdowns cited for Amazon: Six 50% drawdowns since 1997 - Used as an example of the volatility required to capture huge long-term returns. Drawdowns cited for Microsoft: Four 40% drawdowns since 1990 - Another example of large drawdowns in exceptional businesses. Holding-period mix among 10 biggest winners: 7 quality businesses, 3 microcap inflection businesses - Shows where his biggest winners have come from. All-time gain examples: 83%, 217%, 31%, 5%, 30%, 51%, 20% - Returns per annum cited for seven of his top positions. Gatekeeper Systems purchase/exit: Bought at 33 cents; sold for 52% gain; later $1.27 - Example of a mistake of omission where he sold too early. Kraken Robotics price reference: 65 cents to $3.57 - Example of a pass that later became a large winner. Hims & Hers price reference: Mid-teens to $43 - Another opportunity he passed on due to time/understanding constraints. Kits Eye Care price reference: $5 to $16.50 - A business he passed on because it was not yet profitable. Aritzia investment length: About 5 years by October 2025 - His longest-held major winner and an example of patience with quality compounders.

Pivotal Quotes: "Investing is the intersection of economics and psychology." — Seth Klarman: Grieve cites this to emphasize both fundamentals and temperament. "Charlie and I let our marketable equities tell us by their operating results, not their daily or even yearly price quotations, whether our investments are successful." — Warren Buffett: Used to justify measuring businesses by operating performance rather than market price. "Success in investing doesn't correlate with IQ. Once you have ordinary intelligence, what you need is temperament to control the urges that get other people into trouble in investing." — Warren Buffett: Referenced while discussing behavioral edge and emotional control.

Implications: Listeners are urged to adopt a patient, owner-like mindset, focus on business fundamentals over market noise, and build a repeatable process centered on integrity, compounding, and self-critique. The framework favors fewer, better decisions over constant activity and can improve long-term results if applied consistently.