Part 3

1. Masterclass with super
investors Part - 3
By Vishal Mittal and Saurabh Basrar

2. Chapter 7 Hiren Ved
• Introduction - A post graduate in Management Accountancy from
the Institute of Cost & Works Accountants of India (ICWAI) has over
two decades pf experience in the Indian Equity markets. He is CIO of
Alchemy Capital Management, and heads the fund management
function at the firm.
• Enjoys stock picking and extensively covers companies across sectors.
He is also a keen developer of investment process to innovate new
strategies and improve risk management systems

3. • How did Alchemy Capital Start ?
• Lashit and Ashwin Sir had started a firm called Alchemy Research where they made research reports, and people would pay
for their research reports , after realizing that nobody will pay for just their research they became an outsourced research
outfit for other brokers. The brokers took the AMC to the funds to discuss stocks and if the funds did a trade with the
brokers based on the Alchemy research then they would get a part of the brokerage commission, that is how they survived.
• Hiren Ved sir happened to be friends with Lashit and Ashwin sir and proposed to start the Alchemy capital in the late 1999.
So Alchemy Capital was a PMS and Hiren Sir became the Partner.
• Initial Research and General Investment Behaviour
• In the Per Alchemy Capital days, there was no Asset management company, nothing like value added brokerage. It was
about how to recommend stocks to client based on Fundamental Research. Sir’s way of doing groundwork was to visit
companies, plants and reading annual reports.
• Sir was unaware and didn’t understand why people got hassled when stock price dropped from Rs.100 to Rs.80. At that
time NCDs(Non Convertible Debentures) which are fixed income securities were giving good return of 15-18%.
• As of now their perspective related to stock market has become very broad. In early days, their focus was to
understand the company; never stepped back to understand the economy of the business.

4. • Sir’s family have had srtock investments since the 1970s. IN the high interest rate environment, with the NCD at 15-18%,
what were the stock returns like ?
• When sir look at his family holdings from that period there were some companies that compounded at even 30%! But the
real wealth for Sir in Stock market was created post liberalization. With the opening of Indian Economy and Foreign
investors coming in, the Markets had expanded. Initially the markets had not expanded and the markets was not open to
Foreign investors, the only money coming in the market was of Domestic Savings. Despite this ling history, India’s closed
socialist economy and with a lot of rigidities the markets did not encourage many but a very few communities and
entrepreneurs.
• Investment Process and Generating Investing Ideas
• Sir doesn’t leave any chance to meet a new company or visit a plant. Their Primary source of Idea is meeting new
companies and developing new relationships. Sir prefers to meet the Promoter because it helps sir to know his vision
and thought process that matters a lot. Then after meeting many people from the companies, sir tries to understand
the ecosystem .
• Secondly Sir debates about themes that makes sense and tries to find companies that can fit into those themes, So the
themes are basically part Top Down process and part Bottom up process.
• Moving on Sir tries to get great business insights from their clients.
• The Alchemy Capital have an analytics team. They keep updating the team with a lot of trends happened in the past.
Then team keeps on coming up with the universe of stocks that fit those parameters.
• Then in the last Hiren Sir and the rest talk with other smart people , Alchemy used to have a sell side business and
those analysts are now across the market.

5. • Advise to the new investors
First you have to be Curious and interested, if you are not then you will not be a self starter. If someone is curious about being
a good investor then there will not be any forcing to open a balance sheet and read it, the one will be willing to read the
balance sheet till night.
Second is learnability, From two point of view that is from knowledge point of view where Sir explains that the world is
dynamic and since we are investing in lot of sectors we should improve our technical aspect of learnability. The other is in
terms of how you improve your process and judgement, this comes from reflection and a keen observation of other successful
investors.
Another thing in here is after the 2008 Global Financial Crisis, the noise level has increased a lot, the shock was very big to
make people believe that anything and everything impacts the market. While this aspect is true to some degrees, but people
are not able to filter all the information to a few decisions variables.
• Specific habits that one should inculcate to become better investors
• Reading and reflecting are critical. Have a mindset to debate and express your views and to receive it as well. Respect the
pointers which are opposed to your pointers that is very important. There are two things that has worked for Hiren sir that
is reading wide and meeting companies. Sir is also realizing the power of meeting clients and what is happening with their
business. So continuous talk in the ecosystem is important.
• Have an ability to judge the risk and reward. To stay on the table one needs to have capital. You cannot afford to lose
everything. Have a long term horizon, be patient, the last thing which Sir doesn’t recommend to all is leverage, it requires
tremendous self discipline and ruthless ability to manage risk.

6. Chapter 8 Kenneth Andrade
• Introduction – Kenneth Andrade has over 25 years of experience in the Indian
Capital Markets including a formidable 13 year track record managing some of
India’s most successful equity funds. He is the founder and CEO of Old Bridge
capital management, which manages a corpus of 3500 cr in PMS & AIF structure.
Prior to this, he was the CIO at IDFC mutual fund, where he was responsible for
the performance of a corpus of USD 8 billion. A balance sheet focused investor.
• After completing B.Com from Narsee Munjee College and some work experience
and having some good knowledge in accounting. Sir got his first job in Capital
market Magazine which sir had been reading for Seven years.
• He likes to buy dominant companies for improving capital efficiency and wait for
the economic cycle to deliver returns.

7. • Early Experience in the market
• Sir started investing in IPOs that is the Primary markets. The first IPO sir invested in was Digital Equipment India. Sir did his
first secondary trade in 1990.
• The secondary market ballooned in 1992 so that’s when the attention moved from Primary market to secondary market. Sir
ended up buying businesses driven by momentum. So sir learnt that while one accumulates good amount of money, when
the collapse comes, the gains wipes out, along with the capital. At the peak of the cycle Capital deployed is the highest.
• Sir understood that over the time when one don’t loose money that is when you make money.
• Initial investment Philosophy.
• In Sir’s first 10 years there was no investment style or philosophy. Sir just used to do Collect data and procured great
knowledge. Sir worked on balance sheet metrics, a philosophy that sir still works now. Sir thought in the development phase
of looking at corporates basically focused on the efficiency of the corporates. As the capital cost became lower, longevity of
business became longer. All those fundamentals came in play then.
• Sir focused on selecting right companies and putting them together rather having an investment philosophy.
• Return filter when you make an investment
• What sir believes in is not to focus on numbers, but to buy a good company which is a market leader at a good price and
then sit on it and repeat that process. The rest will be done by the market, Sir tries to generate return where he can
generate return more than the risk free rate.

8. • Generating Investing Ideas
• As sir has a lot of experience, there that helped sir to find a lot of companies. Sir tries to go and meet companies. Sir tends
to look for companies where businesses that didn’t do well or have started loosing money or not making enough money. Sir
tries to look opportunities which helps in making decisions. Example if today all the milk processing business have one or
another problem, then Sir would look at them and see what is wrong in that business, in an environment where 70% of the
industry is dominated by government or co operatives, there has to be an opportunity for a smart entrepreneur to come in.
• Sir is a balance sheet focused investor. Sir understands Cash flows and what impact does that have on balance sheet. Sir
doesn’t focus on earning growth, and believes this to be more important then earning growth. Sir aims to buy business with
capital efficiency.
• What sir looks is Capital allocation in Financial statements. Sir looks at the size of the balance sheet and what is causing
stress. Also Sir look for irrational troughs in margin. Sir also looks at leverage.
• Advise to the new investors.
• Patience and discipline are major attributes. You got to say “No”, if you buy something and you do not understand, you will
not know when to sell it and you will get stuck. You will have to acknowledge that there will be somethings that you will not
know and you will just have to move on. You will have to pick one and stay for long.
• Develop the depth understanding of the market toady, because of the easy access to the information. How to use data is
more critical. Understand what will work for you better and continue to do that and one will make less mistakes. What sir
says is investing is not about getting everything right but to get nothing wrong, make less mistakes. One will have to grind in
the initial years.

9. Chapter 9 Vijay Kedia
• Introduction - Vijay Kishanlal Kedia started trading in the stock
markets with zero corpus. Sir overcame challenges and transitioned
to become a successful investor by betting on selected companies.
• A self learner, his gift has been identifying unknown companies, with
capable management, at low valuations and also getting a few big
winners in every bull market. In 2016 he was honored with a
doctorate degree. He has been invited as a key speaker by almost top
B schools of India including IIM – A, IIM – B, and also London Business
School and Ted – X recently.

10. • Early Experience in the market
• During Sir's initial days in the markets, Sir was vey successful in trading. Sir was trading based on intuition. Sir started
trading with 100 shares , 200 shares and went on. Sir tried to pull money from one trade to the other, since then sir
believed to become rich faster but the plan backfired. Sir also tried to do other businesses such as supplying some
material to tea gardens and jute mills to make money for Sir’s daily expenses. But it was small amount of money that
sir made.
• Sir believed that the First rule in the market is to survive, the second rule is to make money. Sir believed that market
will provide rewards according to ones perception, Example if someone is there to make money daily then he will
receive that. If someone is willing to take bigger risks and earn big then the one will have to take calculated risks. In
trading there is no value for Fundamentals and in Fundamental investing there is value of Stop loss.
• In 2008, sir shorted the market when the market had started going down. That went well for sir.
• How was Sir able to catch a big winner in every bull run. Views on strategies.
• Sir used to focus on companies that were leaders of the bull market. Since sir’s focus was on small caps the smaller
stocks moved after large caps and that is when Sir looked at them. One has to read for that.
• So one insight that sir gave us was that many sectors that do well in the previous bull market may not do well in the
current bull market. A trend that sir believes will continue.
• Does Stock market movement impacts Sir’s thinking process?
• What sir said was that if his share is falling in a normal market there is cause to worry. But if its falling with the rest of
the market then one shouldn’t worry that much, Again if sir’s share are not rising with the market then sir would be
worried. The formula which sir shared was if the market is at 52 week high and our stock is at 52 week low then we are
in problem if we are long term investor.

11. • Generating Investing ideas
• Sir reads and focuses on understanding which sector will do well and which companies are good in that sector. Sir reads all
business news. One should have the passion to be aware of the new developments. Try to connect dots. Try to look for
broad developments happening around the world, those developments will ultimately happen in India. Also the size of the
market has to be big.
• Sir doesn’t track many companies but reads about a lot of companies. Sir aims in generating 2-3 good ideas a year. Sir looks
at annual reports, conference calls, newspaper articles. Sir tries to talk to people having business dealings with the
company.
• Normally Sir doesn’t meet management, but first sir invest in companies and if somebody wants to meet Sir then Sir meets.
Sir doesn’t see value in meeting management.
• Sir evaluates management by looking for 3 things that is honesty, hunger and smartness. Honesty in management is not
creating value for himself and his fellow families but also to take care of shareholders and create value for them, Hunger is
the management should not get self satisfied after growing his company example from 200cr co. grows to
800cr,Mnagement should not think of going easy on the business now. His aspiration should be to grow from regional to
nation and from nation to international and then global size. Lastly, the management should be smart enough to have tricks
and solutions when the company is into crisis or when the opportunities arrive.
• If you see a 70 years old company and still it is a small size, then it is a laggard management.
• Sir gives primary importance to growth. Sir should feel that the company’s growth should be better than the industry conic
growth even if the company’s growth is average now.

12. • Attributes important to an investor.
• First is to think long term. Second is think about the stock market investing as a business. Once we see it as a business all
things will be aligned. Think like a promoter. Be committed to the stock and not to think about getting on and off the stock
every time.
• One should not think about being a billionaire overnight. Stock market is not a gamble but a full time business. Its high risk,
high reward, volatile business. One should be able to risk management and risk management.
• One should look for management track records. Keep focus on the companies where you can make substantial investment.
Don’t waste energy over small allocations.
• One should read a lot of brokerage reports to know more about industries and companies.
• Keep your mind calm and educate yourself as much as possible. Learn from observing other accomplished people.