In this edition of LEARNING OF THE WEEK, we will cover the investment philosophy of Mr. Hiren Ved.
“Today, the challenge is to adapt. We all have cobwebs in our heads, and we think this won’t work or that won’t work. How we refrain from insanity, and still evolve as an investor, is the next big leap”. – Mr. Hiren Ved (Co-founder, CIO, Director – Alchemy Capital Management)
There’s a famous saying by Friedrich Nietzsche – “That which does not kill us, makes us stronger.” It’s all about overcoming hardships, showing resilience, and most importantly, adapting to change. Among Indian investors and fund managers, few embody that last quality better than the subject of our newsletter – Mr. Hiren Ved.
Mr. Ved’s journey into the stock market began early—at just 18, he would visit the market after his college classes, soaking in its fast-paced energy. He officially started his career in 1991, spending nine years refining his skills in both sell-side and buy-side research. He also made a habit of attending annual shareholder meetings, giving him valuable face-to-face time with company management and deep insights into the business world.
Then came 1999, a turning point. Mr. Ved co-founded Alchemy Capital Management, along with Mr. Lashit Sanghvi, Late Mr. Rakesh Jhunjhunwala, and Mr. Ashwin Kedia, marking his entry into the world of fund management. But his vision extended beyond just the stock market. Recognizing the growing influence of digital media, he also co-founded what would become a major name in Bollywood and Asian digital entertainment – Hungama Entertainment Pvt. Ltd. Alongside Mr. Ashish Kacholia, Mr. Lashit Sanghvi, Late Mr. Rakesh Jhunjhunwala, and Mr. Neeraj Roy, he saw the potential of the digital world long before it became mainstream.
This ability to spot emerging opportunities and take decisive action is what defines Mr. Ved’s career. Through all these years, one thing has remained constant—his ability to adapt. While staying true to his core investment principles, he believes that success in investing (and in life) comes down to one key skill: evolving with the times. As he puts it, “If you don’t adapt, you die!”
Here are the top 7 learnings from Mr. Hiren Ved
1. Investment Criteria:
He looks at three things together in a stock as a three-dimensional equation – growth over the next three to five years, ROCE, and valuation.
2. Valuation:
Evaluate valuation within a framework that considers individual, company-level, and sector-level perspectives. When acquiring a business with a respected leader in the sector, assess its position relative to the sector leader based on both quantitative and qualitative criteria.
3. P/E Re-Rating & De-Rating:
In his assessment, P/E is a function of two important variables –
Growth & ROE, and how these variables change incrementally based on the assessment’s point of reference.
Growth – If earnings growth is slowing down in a high growth company, you might have a de-rating.
ROE – It is more sensitive than growth. If you have a situation where the ROE collapses, then there is a very high probability that the P/E will de-rate. If both the ROE and earnings are expanding, then there is a very high probability that there will be P/E re-rating.
4. Process of Generating Investment Ideas:
- Primarily by travelling and meeting companies. As a team, Alchemy meet at least 150-200 companies in a year.
- Debate about themes that make sense. He look for top-down themes and then go out and find companies that can fit into those themes. So, partly it is a bottom-up approach and partly it is a top-down thought process.
- He and Alchemy get a lot of business insights from our clients.
- He have an analytics team at Alchemy that keep parameterizing a lot of our past knowledge of trends. They keep coming up with a universe of stocks that fit those parameters.
- Talk to other smart investors.
5. Best time to BUY:
The best time to buy is when the macro is bad. That’s when you get the cheapest valuation. Also, in times like these, when the growth is not broad-based, quality outperforms. When growth becomes broad-based, the value will start outperforming.
6. Investing in Turnarounds:
There are two ways to play it –
- Buy it at a very cheap price, where the margin of safety is high.
- Wait for an investor to come in and infuse equity or debt and you see who will be in the driver’s seat. In this process, you would have saved yourself the time, opportunity cost, volatility, and heartburn of being part of this story if you bought it anywhere near high prices.
7. Handling External Money
When managing external money, he has realized one thing – keep the beta of the portfolio low and you will be happy. People fear the downside more than they applaud the upside. So, if you can protect the client’s downside, it has a wonderful impact on your business.
MEME OF THE WEEK
