Invest Like the Best with Patrick O'Shaughnessy
Kelly Granat - Investing At Lone Pine - [Invest Like the Best, EP.414]
Tue, 11 Mar 2025
My guest today is Kelly Granat. Kelly is the Co-Chief Investment Officer and Managing Director at Lone Pine Capital, one of the most storied and successful hedge fund and investment firms of the last several decades. We explore how investing has evolved since Kelly joined the industry and she shares insights into Lone Pine maintaining its edge through deep fundamental research and a collaborative culture. We discuss what makes great businesses and great investments, how leadership can transform companies, and Kelly’s perspective on evaluating management teams and identifying opportunities around corporate change that the market often misprices. Please enjoy my conversation with Kelly Granat. Subscribe to Colossus Review. For the full show notes, transcript, and links to mentioned content, check out the episode page here. ----- This episode is brought to you by Ramp. Ramp’s mission is to help companies manage their spend in a way that reduces expenses and frees up time for teams to work on more valuable projects. Ramp is the fastest-growing FinTech company in history, and it’s backed by more of my favorite past guests (at least 16 of them!) than probably any other company I’m aware of. Go to Ramp.com/invest to sign up for free and get a $250 welcome bonus. – This episode is brought to you by AlphaSense. AlphaSense has completely transformed the research process with cutting-edge AI technology and a vast collection of top-tier, reliable business content. Imagine completing your research five to ten times faster with search that delivers the most relevant results, helping you make high-conviction decisions with confidence. Invest Like the Best listeners can get a free trial now at Alpha-Sense.com/Invest and experience firsthand how AlphaSense and Tegus help you make smarter decisions faster. – This episode is brought to you by Ridgeline. Ridgeline has built a complete, real-time, modern operating system for investment managers. It handles trading, portfolio management, compliance, customer reporting, and much more through an all-in-one real-time cloud platform. I think this platform will become the standard for investment managers, and if you run an investing firm, I highly recommend you find time to speak with them. Head to ridgelineapps.com to learn more about the platform. ----- Editing and post-production work for this episode was provided by The Podcast Consultant (https://thepodcastconsultant.com). Show Notes: (00:00:00) Learn About Ramp, Alphasense, & Ridgeline (00:06:09) Market Structure Evolution (00:08:39)The Impact of Passive Investing (00:10:21) Collaboration & Team Dynamics (00:13:48) Excitement in Periods of Extreme Change (00:14:21) The Role of Competition & Curiosity (00:22:00) Fundamental Research & Data Integration (00:27:34) Investment Philosophy (00:35:31) People-Centric Investing (00:42:24) Succession Planning (00:49:32) Facing the Pressure of Early Success (00:50:31) Burnout & Rediscovery (00:57:08) Learning from Industry Leaders (00:58:04) Evaluating Talent and Competition (01:11:29) Lessons in Investment (01:27:27) The Kindest Thing Anyone Has Ever Done For Kelly
Chapter 1: What is the main topic of this episode?
Something I speak about frequently on Invest Like the Best is the idea of life's work. A more fun way to think about it is that I'm looking for maniacs on a mission. This is the basis for our investment firm, Positive Sum, and it's the reason why I'm so enthusiastic about our presenting sponsor, Ramp.
Not only are the founders, Kareem and Eric, life's work-level founders, certainly maniacs on a mission, they have created a product that is effectively an unlock for founders and finance team to do more of their life's work by streamlining financial operations, saving everyone their most precious resource, time. Ramp has built a command and control system for corporate cards and expense management.
You can issue cards, manage approvals, make vendor payments of all kinds, and even automate closing your books all in one place. Speaking from my own experience using Ramp for my business, the product is wildly intuitive, simplistic, and makes life so much easier that you'll feel bad for any company who hasn't yet made the switch.
The Ramp team is relentless, and the product continues to evolve to save you time that you would never have dreamed of getting back. To me, there is nothing more interesting than technologies that reduce friction for other entrepreneurs to be able to build the thing that they want to. So much attention has gone to cloud computing, APIs, and other ways of making life easy for founders.
What Ramp has done and is doing is build yet another set of tools in this category. To get started, go to ramp.com. Cards issued by Celtic Bank and Sutton Bank, member FDIC. Terms and conditions apply. As an investor, staying ahead of the game means having the right tools, and I want to share one that's become indispensable in my team's own research, AlphaSense.
It's the market intelligence platform trusted by 75% of the world's top hedge funds and 85% of the S&P 100 to make smarter, faster investment decisions. What sets AlphaSense apart is not just its AI-driven access to over 400 million premium sources like company filings, broker research, news, and trade journals, but also its unmatched private market insights.
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Chapter 2: How has market structure evolved over the years?
With the recent acquisition of Tegas, AlphaSense now holds the world's premier library of over 150,000 proprietary expert transcripts from 24,000 public and private companies. Here's the kicker. 75% of all private market expert transcripts are on AlphaSense and 50% of VC firms on the Midas list conduct their expert calls through the platform.
That's the kind of insight that helps you uncover opportunities, navigate complexity, and make high conviction decisions with speed and confidence. Ready to see what they can do for your investment research? Visit alphasense.com slash invest to get started. Trust me, it's a tool you won't want to work without.
Chapter 3: What are the impacts of passive investing?
Ridgeline gets me so excited because every investment professional knows the core challenge that they solve. You love the core work of investing, but operational complexities eat up valuable time and energy. That's where Ridgeline comes in. Ridgeline is an all-in-one operating system designed specifically for investment managers, and their momentum has been incredible.
With about $350 billion now committed to the platform and a 60% increase in customers since just October, firms are flocking to Ridgeline for good reason. They've been leading the investment management tech industry in AI for over a year with 100% of their users opting into their AI capabilities, putting them light years ahead of other vendors thanks to their single source of data.
Chapter 4: How does collaboration influence investment decisions?
And they recently released the industry's first AI agents, digital coworkers that can operate independently. Their customers are already using this highly innovative technology and calling it mind-blowing. You don't have to put up with the juggling multiple legacy systems and spending endless quarter ends compiling reports.
Ridgeline has created a comprehensive cloud platform that handles everything in real time, from trading and portfolio management to compliance and client reporting. It's worth reaching out to Ridgeline to see what the experience can be like with a single platform. Visit RidgelineApps.com to schedule a demo. Hello and welcome, everyone. I'm Patrick O'Shaughnessy, and this is Invest Like the Best.
This show is an open-ended exploration of markets, ideas, stories, and strategies that will help you better invest both your time and your money. If you enjoy these conversations and want to go deeper, check out Colossus Review, our quarterly publication with in-depth profiles of the people shaping business and investing.
You can find Colossus Review along with all of our podcasts at joincolossus.com.
To learn more, visit psum.vc.
My guest today is Kelly Granite. Kelly is the co-chief investment officer and managing director at Lone Pine Capital, one of the most storied and successful hedge fund and investment firms of the last several decades.
We explore how investing has evolved since Kelly joined the industry, and she shares insights into Lone Pine maintaining its edge through deep fundamental research and a collaborative culture. We discuss what makes great businesses and great investments, how leadership can transform companies, and Kelly's perspective on how the market often misprices management and corporate change.
Please enjoy my conversation with Kelly Granite. Kelly, maybe the fun place to begin is the playing field of investing as you see it.
I'm especially curious about how it feels the most different, not in terms of AI and like where the opportunities are, but just like the structure of the market itself and the game of investing large dollars trying to earn excess return in the structure that you do it in.
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Chapter 5: What is Lone Pine Capital's investment philosophy?
And so as a fundamental investor, you were really going bottoms up, single stock, building a portfolio that way, and obviously looking at things like what acted best, in concert with one another, correlations, things like that. But it was a different job. So that's sort of like a snapshot of 25 years ago, let's say.
Fast forward to today, and obviously market structure has evolved meaningfully as a function of where the dollars are being traded. And obviously the emergence of passive and pods has been sort of the giant sucking sound in the public markets for a long time. And I feel like the marginal dollar being dictated by
fundamental decisions that are long-term oriented by the capitals, the Fidelity's, the Tito prices of the world is just less meaningful on how stocks actually trade. And the new behavior it feels is more around what we call kind of setup dynamics and that is
a function largely of the dissemination of a lot of this third-party data, creating set-up dynamics around events, quarters, conferences, companies, you know, having speaking investor days, and how those events are being previewed as a function of what third-party data is suggesting or what the sort of litany of sales traders at the banks are sort of prompting buy-side people with in terms of where the whisper numbers are and so forth.
And so that creates just a different trading dynamic in terms of how you execute the job, right?
In addition, obviously, what I mentioned earlier, we do now have, as portfolio managers, a lot of tools to help us think through risk differently, portfolio construction differently, and then how that then manifests itself is how we express sort of the fundamental sauce of what we do, which is the fundamental research, right?
we were saying earlier, we were talking before we started about just our trading volume has clearly gone up over time on a dollar basis, less so on a name basis, because you get these outsized reactions that are often non-fundamental in nature to events, quarters, and so forth. And so all of those, you know, the tools are different, the resources are different,
And then the last piece would be just the collaboration's different. In contrast to what I described earlier of kind of a siloed coverage model inside of a firm, it's not uncommon for us to show up at a company's headquarters for a meeting with four, five, six analysts because there's people covering things that are adjacent to the topic at hand.
and the company at hand and so often there's insights to be gleaned and questions to be asked that have implications for things that are outside of the purview of the conversation of that day and that is super helpful and we meet as a group twice a week as a research team and are sharing information constantly across our organization because obviously five brains is better than one and people have thoughts because they're in the periphery of what we're actually discussing often with their own coverage areas and so the notion even of a coverage area we kind of shy away from at this point because
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Chapter 6: How do leadership changes affect company performance?
So when those setup dynamics are tricky or complicated and everyone's lined up one way, I want to line up the other way, right? And I have the duration and the capital base to do that. And so that's, I think, we've always said that duration is our single biggest advantage, but it's never felt more prominent and powerful than it is in today's market structure. Having said that,
You know, sometimes there are tricky things in the short term. There's a data point that we feel like the market hasn't fully absorbed. There's a risk factor in the short term or there's an investment cycle coming on something we love on a three or four or five year look. But we might be sized differently going into that event. Doesn't mean we're going to go in and out of positions.
We rarely would do that. but we might be positioned differently. And I think the other thing I should have mentioned earlier in terms of just the difference of today versus before is, and this comes through at the portfolio level, is we are definitely running lower gross exposure as a firm than we did for the first probably 15 to 17 years of our existence as in deference to this dynamic, right?
So we want room to be adding to things when we think there are non-fundamental reactions that don't make sense or overreactions to things that we think aren't that big a deal, right? And so for the first bunch of years of our existence, we ran more like 170 by 200 gross.
And we've been consistently for the last six to eight years, we've been running more kind of 150 by 180 gross to give ourselves that room to breathe so that we can not have to play defense at the wrong time. And I can actually lean in when everyone's leaning out and vice versa.
People that really love investing, I know you're one of them, seem to get the most excited during periods of extreme change. We were talking before we hit record about mobile being the last massive thing that just upended the world. And now we're living through another one that might be the biggest one that any of us ever see in our careers. What's that like for you?
It would be one thing if you were just starting into this, but you're managing a big existing thing, a big pool of capital now. and probably expressing a lot of what you're learning about the world through some of the biggest companies in the world, not necessarily through early-stage startups or something. What is that like? Just talk me through what it's been like so far to process this.
It makes us kind of giddy. Can I geek out for a second? Yeah, please. Why, when I think about why did I get into this field in the first place, I think there's two sort of defining characteristics that I have that position me well to do this job. One is that I'm a wildly competitive human being. I was a junior tennis player for my entire junior career before going to college. I played in college.
I love to compete. I love a scorecard, right? That's just who I am as a human. Mm-hmm. The second is that I'm an incredibly curious person who is very focused on growth, and growth in lots of ways. I mean, growth in terms of learning about new things, challenging myself. I play instruments. There's lots of things I'm interested in as a human.
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Chapter 7: What does Kelly Granat find energizing about investing?
And when you think about all those characteristics, how do you suss them out in someone that might come work for you? Especially if they're young and like, there's not like.
I say all the time that, you know, What I can glean from a 30-minute interview is pretty limited in terms of someone's ultimate ability to do this job well. So that's why we have a summer internship program for MBAs, because it gives us kind of eight to 10 weeks to evaluate them and vice versa, right? To figure out if there's a fit, how this person works, how they think. So for me,
I look for a couple things. It won't surprise you to hear that I love hiring competitive athletes who have competed at a high level. I don't care the sport. It could be an instrument. That's great, too. But people who understand hard work, failure, disappointment, achievement, what that all feels like to people who have had to juggle things in their lives. Right.
So they had to work a couple of jobs while they were in college. They had some sort of misfortune in their life, you know. a relative, a sibling, or something that's happened to them that they've had to pick themselves up and work through. People who are interested in lots of things because they're curious, right? People who love to learn.
That is ultimately, we said this earlier, like foundational, I think, for being successful in this job is never being complacent and thinking that you know more, but recognizing and being humbled by the fact that there's always more work you can do But the companion skill to that is knowing when you know enough to make a decision, right?
Because I think you can get into analytical paralysis around like there's more to do, there's more to do, there's more to do, and like we're in the decision-making business, right? And so that balance of curiosity and pursuit of knowledge and learning and growth The self-awareness to admit when one is wrong, which is an incredibly important part of what we do.
And the willingness to take some level of risk or offer some kind of contrarian thinking that often can position us really well to make money.
Who do you view as your competition? Is it firms? Is it just the whole market? Is it?
It's so funny because the firms that we're always lined up against in the press are some of my closest friends. And none of us view it competitively at all. In fact, several former guests on your show are super close friends of mine. And... In some ways, I view our competition, honestly, as ourselves. Like we need to be better and do better.
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