This is part one of a three-part interview with Himanshu H. Shah President and Chief Investment Officer of Shah Capital. The interview is part of ValueWalk’s Value Fund Interview Series.

Throughout this series, we are publishing weekly interviews with value-oriented hedge funds, and asset managers. All the past interviews in the series can be found here.

Shah Capital is a global investment firm targeting unique opportunities, primarily focused on deep value, turn-around and special situations. According to BarclayHedge data, since inception (July 1, 2006) Shah has produced steady returns for investors reporting annualized net gains of 7.8% per annum.

According to BarclayHedge, over the past three years, Shah has achieved an extremely impressive annualized compounded return of over 20%. In their rankings, the fund has been ranked #8 for equity long-biased funds for the past 36 months.

For compliance reasons, Shah Capital’s own returns figures cannot be published.

The interview has been divided into several parts and will be downloadable as a PDF at the end of the series. So stay tuned for the rest of the series as well as the downloadable PDF!

Interview with value fund Shah Capital [Pt. 1]

Rupert Hargreaves: To start off, can you tell us a bit about Shah Capital and the team working at the fund?

Himanshu H. Shah: Shah Capital is a global investment firm focusing on deep value equity, turn-arounds and special situations with an AUM of over $250 million. The firm was founded in 2005 by Himanshu H. Shah who has over 25 years of global investment experience. As a firm, we believe in dynamic capital and our strategy reflects that. As for new opportunities, we look across multiple sectors with the right set of economics. Our deep analytical research provides us with better long-term risk management and we strive to have multiple paths for exits or value creation hence dynamic capital.

The team at Shah Capital consists of 7 members with significant global experience and diverse background sets. The Research team has over 50 collective years of experience. As a RIA, we have full-fledged compliance and partner relations professionals.

RH: What do you think makes Shah stand out from the crowd?

HS: Our ability to blend the bottom up fundamental approach with our intricate global macro understanding is the differentiator. Our analysis goes beyond valuation to strategy of a business, competitive landscape, management capabilities and also the innovation of the company. As long-term investors, we strive to think ahead of the curve anticipating change which often times is contrarian. Our select soft activist efforts have also yielded significant results with companies domestically as well as internationally.

investment photo
Photo by PublicDomainPictures (Pixabay)

RH: How do you go about looking for an investment (both long and short) at Shah; what’s your investing process?

HS: The core of our investment process lies around valuation and the business fundamentals. This drives both our long and short (with QE, ZIRP and NIRP distorting investment process we really have not been short this market since 2012) positions. Having been in this trade for over 25 years along with the experience and intense nature of our research and staying on top of global trends; that gives us the basis for our investment ideas. There is honestly no exact formula for our process but through the years and results, it certainly has been proven. It is the insights from our analysis that really sets us apart.

RH: How do you approach valuation?

HS: So while often we could fall into a “value investor” bucket, we don’t let that be the only guidance for us. We are very selective. We do look for a margin of safety here as we don’t mind volatility in a stock but are taking every calculation that we are not stepping into a situation where can have permanently impaired capital. Overall we are looking for companies that are absolutely or relatively undervalued, or both. We are not chasing very high multiples or momentum. Just disciplined investing. This has been a key focus for us and big driver of our success.