#7thVIPS 2023 – Learnings from the Cycles | Shyam Sekhar |

Shyam Shekhar, a seasoned investor with over three decades of experience in Indian public and private markets, has navigated the ever-evolving world of finance, adapting and refining his investment approach along the way. His journey in value investing, which began in the early 1990s, reflects the challenges of timing in investing and highlights a significant shift toward private market and entrepreneurial investments in recent times.

In his talk on “ Learnings from the cycles” presented during 7th Value Investing Pioneers Summit (VIPS), Mr. Shyam Sekhar encapsulated his whole investing journey and learnings therein.

The Foundation: Early Years (1990-2000)

In the early 1990s, Shyam Shekhar embarked on his investment journey, which laid the foundation for his enduring principles. He gravitated toward value investing, a strategy focused on identifying undervalued assets. This period was instrumental in shaping his approach, as he learned to discover quality investments and move into undervalued stocks. Shyam recognized the significance of “scuttlebutt,” a technique for gathering valuable information by engaging with knowledgeable sources.

These formative years taught him the art of looking closely at investments, thinking beyond immediate market trends, and understanding the cyclicality of financial markets. He honed skills in scaling bets to manage risk, rightsizing positions for portfolio diversification, and constructing a balanced investment portfolio. The early 1990s marked the beginning of his investment philosophy, which prioritizes continuous learning and evolving one’s investment style.

The Transformation: 2000s (2000-2010)

The next decade, from 2000 to 2010, ushered in a transformative phase in Shyam’s investment journey. He embraced the concept of “Thinking Themes,” which involved identifying broader market trends and themes that could drive investment opportunities. This shift reflected his understanding of the importance of being early in recognizing emerging trends and capitalizing on them.

As the decade unfolded, Shyam successfully bridged the gap between growth and value investing. He realized that growth and value were not mutually exclusive and started straddling both realms. His strategy aimed to capture the best of both worlds, diversifying his portfolio effectively.

Furthermore, this transformative period involved refining his investment process and adapting to changing market dynamics. It exemplified his ability to thrive in evolving conditions and marked significant shifts in his portfolio strategy.

A Decade of Growth and Challenges (2010-2018)

From 2010 to 2018, Shyam’s investment journey saw substantial growth and notable challenges. He recognized that successful investing involved managing investments through challenging macroeconomic environments while capitalizing on great micro-level potential, an approach he coined as “Bad Macros + Great Micros.”

During this phase, Shyam placed significant bets on growth stocks, adopting a classic buy-and-hold strategy. This strategy involved making fewer investment decisions and placing a strong emphasis on holding investments for extended periods. While this focus on longer holding periods yielded success, he also encountered challenges in selling investments and realizing exits.

The demands of scaling up his investment process became evident as his portfolio grew. Managing a larger portfolio required increased attention and diligence, underscoring the importance of adaptability in the face of growth and change.

Collaboration and Conviction (2010-2018)

During this period of growth and challenges, Shyam recognized the need for collaboration and working with others in the complex investment landscape. He emphasized that investors should consider involving co-investors or investment professionals to navigate the intricacies of the market effectively.

In addition to collaboration, Shyam adopted a strategy of holding substantial positions in individual companies. This approach demonstrated his strong conviction in his investment choices and aligned with the core principles of value investing.

The Circle: Why Timing Doesn’t Work

Throughout his investment journey, Shyam maintained a philosophy that timing the market, both in terms of entering and selling stocks, is a futile exercise. He emphasized the unpredictability of market movements and the difficulty of consistently making well-timed decisions. Instead, he encouraged a focus on long-term, fundamental investment principles, highlighting the importance of patience and holding through market cycles for better results.

Reimagining Investment in a Post-COVID Era (2019 and Beyond)

The period following 2019 marked a significant phase in Shyam’s investment journey, profoundly influenced by the onset of the COVID-19 pandemic. The disruption caused by the global pandemic led to profound psychological scars for investors and prompted a shift in mindset.

Shyam adapted by adopting the “10-year filter,” focusing on long-term investment horizons while filtering out short-term noise. This approach allowed him to navigate the heightened market volatility and uncertainty stemming from the pandemic.

Furthermore, he ventured deeper into private equity (PE) investments, seeking stability and unique return opportunities in alternative asset classes. This shift reflected his strategic response to the challenges presented by the COVID-19 pandemic and the evolving investment landscape.

The Power of Themes

Themes played a central role in Shyam’s investment philosophy. He viewed them as valuable frameworks for organizing thoughts effectively and making sense of complex market dynamics. Themes helped him envision how trends would unfold in the future, enabling him to construct a theme’s future in the present. He emphasized patient and diligent validation of themes, underlining that success should motivate investors to build on them further.

Core Beliefs: Own Your Investment Philosophy

Shyam’s core beliefs revolved around the principle of “Own Your Investment Philosophy.” He emphasized the need for investors to define their own investment philosophies, aligning their strategies with their unique goals and perspectives. His view was that all investing inherently involved elements of growth and value investing. He encouraged investors to maintain a free-spirited approach to ideation, fostering creativity, flexibility, and protecting their core convictions.

He advocated for investors to coexist with the crowd but not blindly follow it, emphasizing independent thinking. Shyam suggested that investors should continually reinvent themselves to stay relevant and successful in the ever-changing world of finance.

The Role of Personal Growth and Adaptability

Shyam underscored the significance of personal growth and adaptability in the world of investing. He believed that investors should continuously reinvent themselves to navigate changing market conditions, embrace emerging trends, and learn from past experiences. In his view, behavior was a critical factor in achieving investment success, delivering more beta than any other factor.

In summary, Shyam Shekhar’s investment journey is a testament to the dynamic nature of financial markets and the need for continuous learning and adaptation. His core beliefs emphasize individuality, flexibility, and disciplined behavior in achieving investment success.