TIP755: My Process for Finding Great Investments w/ Kyle Grieve
Timestamps are as accurate as they can be but may be slightly off. We encourage you to listen to the full context.
Podcast Summary
In this deeply personal episode, Kyle Grieve pulls back the curtains on his complete investing philosophy, sharing both his winning strategies and painful failures. Since 2020, Kyle has generated an 18.7% annualized return compared to 17.8% for the S&P 500, developing a consistent, repeatable process designed for long-term wealth compounding. (00:35)
The episode traces Kyle's evolution from a speculative crypto trader who lost 97% of his capital to a disciplined value investor. He candidly discusses his early mistakes with technical indicators and leverage before discovering value investing principles during the 2020 market crash. (02:30)
• **Main Theme:** Building a sustainable investing philosophy through learning from failures, focusing on business ownership mentality, and creating systems that reward patience over constant activity.Speakers
Kyle Grieve
Kyle Grieve is the host of The Investor's Podcast and has been investing since 2020. He began his investing journey in cryptocurrencies in 2017, where he experienced significant losses that shaped his later approach to equity investing. Kyle has generated an 18.7% annualized return since 2020 and has developed a disciplined value investing approach focused on long-term compounding. He has interviewed numerous successful investors and has absorbed lessons from some of the best investing books ever written, using this knowledge to build his own systematic approach to stock selection and portfolio management.
Key Takeaways
Set Ambitious but Achievable Return Goals
Kyle's primary investment goal is to double his capital every five years, requiring approximately 15% annual returns. (09:01) This ambitious target forces him to be highly selective, only investing in businesses capable of significant appreciation. However, he acknowledges the risks: high expectations can lead to disappointment when companies fail to meet growth projections, causing significant stock price corrections. The key insight is that aggressive return targets can drive better stock selection but require exceptional discipline in managing disappointment and maintaining long-term perspective.
Adopt a Business Owner Mindset Over Trading Mentality
Kyle emphasizes investing like a business owner rather than a trader, treating each stock as genuine ownership in a real business. (13:29) This approach helps him hold onto compounding businesses through inevitable volatility. He imagines the people managing his money as close associates, creating a psychological framework that encourages patience during temporary headwinds. This mindset shift makes share price fluctuations less concerning and focuses attention on fundamental business performance rather than market sentiment.
Use Two Distinct Investment Buckets for Different Opportunities
Kyle categorizes his investments into two buckets: quality businesses (63% of portfolio) and micro cap inflection point businesses. (18:07) Quality businesses require competitive advantages, talented aligned management, and returns on invested capital exceeding 15% over multiple years. Micro cap inflection businesses need two quarters of 25%+ revenue and earnings growth, strong management ownership, and ability to earn high returns on capital. This framework allows him to capture both stable compounders and explosive growth opportunities while maintaining different risk management approaches for each category.
Focus on Operating Results Rather Than Stock Price Performance
Following Warren Buffett's approach, Kyle measures success through operating results rather than daily or yearly price quotations. (54:53) He calculates owner's earnings (cash from operations minus maintenance CapEx) for all holdings and tracks how this metric grows over time. If owner's earnings continue rising above his 15% hurdle rate, he considers the business performing well regardless of short-term stock price movements. This approach helps maintain focus on business fundamentals and avoid noise from market volatility.
Engineer an Environment That Fosters Inaction
Kyle deliberately creates an environment that encourages patient holding rather than constant trading activity. (56:08) He avoids financial television, limits social media noise, and checks portfolio performance only quarterly. This counters the natural tendency toward overactivity that destroys returns. He recognizes that most information doesn't require action and that successful investing involves doing very few things but doing them extremely well. The key is removing stimuli that trigger unnecessary trading while maintaining access to truly important business information.
Statistics & Facts
- Kyle has generated an 18.7% annualized return since 2020, compared to 17.8% for the S&P 500 over the same timeframe. (00:03) This outperformance demonstrates the effectiveness of his disciplined approach.
- In his cryptocurrency investing phase, Kyle lost 97% of his capital over a short period during the 2017-2018 market correction. (03:50) This devastating loss taught him crucial lessons about avoiding technical indicators, leverage, and shorting.
- Berkshire Hathaway has had 3 drawdowns of 40%+ since 1990, Amazon has had 6 drawdowns of 50%+ since 1997, and Microsoft has had 4 drawdowns of 40%+ since 1990. (15:49) These statistics demonstrate that even the best long-term performers experience significant temporary declines.
