At a time when passivity investbenchmark tracking and broad diversification dominate investor conversations, Sameer Shah believes in the long term wealth creation still comes from identifying transformative changes business anticipate trends and support them with conviction.
Over the past 15 years, ValueQuest Investment Advisors has built its investment framework around what Shah describes as a “private equity approach” to public procurement – focusing on in-depth research, quality of management, industry structures and long-term profit pools before making investment decisions.
In this edition of ETMarkets PMS Talk, Shah discusses how the firm’s investment philosophy has evolved over market cycles, why concentrated portfolios can outperform when supported by rigorous analysis, and the structural themes (from manufacturing and defense to AI, aerospace, and the energy transition) that could shape the next decade of investing.
He also shares his views on the alpha opportunities in today’s market and why some of the most exciting investment ideas remain underowned and underappreciated by the market at large. Edited extracts –
Q) Value Quest has 15 years of experience in the investment management industry. How has your investment philosophy evolved over the years, particularly through different market cycles?
A) Over the past 15 years, our philosophy has remained rooted in early identification of structural themes and trends, supported by a solid top-down understanding of economics and industry cycles.
We combine this with extensive bottom-up research to identify companies that are emerging leaders or credible challengers in these themes.
What has evolved over time is the institutionalization of our process: we have added stronger guardrails around risk, portfolio construction and governance to improve consistency of results across market cycles.
This balance between conviction-based investing and disciplined risk management continues to define ValueQuest’s approach.
Q) Your firm follows a concentrated, high-conviction portfolio strategy. In a market where diversification is often emphasized, what gives you confidence in this approach?
A) At ValueQuest, we follow what we often describe as a “private equity approach” markets — spend significant time understanding industries, management teams, competitive advantages and long-term profit pools before making investment decisions.
We have always believed that informed concentration is different from speculative concentration. When you deeply understand management quality, industry structure and company fundamentals, a concentrated portfolio can lead to better risk-adjusted results.
Diversifying beyond a certain point can dilute conviction and impact. Our focus remains on deeply understanding businesses and proactively managing risks.
Q) ValueQuest has always focused on early identification of structural megatrends. What themes are you currently most excited about over the next 5 to 10 years?
A) Over the next 5-10 years, we remain very constructive on India’s manufacturing opportunities, driven by both domestic demand and global supply chain diversification. AI is emerging as a defining global theme, and some Indian companies are increasingly becoming part of the hyperscaler and data center ecosystem.
We also see strong long-term potential in defense and precision engineering, particularly in aerospace and space-related opportunities. The energy transition continues to benefit from powerful favorable structural and geopolitical drivers, while pharmaceutical CDMO and the emerging GLP-1 ecosystem remain compelling healthcare themes. These opportunities are shaped by political support, technological disruption, and growing strategic autonomy on a global scale.
Q) Given current market valuations, where are you finding alpha opportunities today: large caps, midcaps, or emerging companies?
A) We do not approach markets through the prism of segmentation by market capitalization. Our investment process is more focused on identifying emerging trends, structural changes and areas where significant profit reserves can potentially develop over the next 5-10 years.
Our top-down thematic research helps us identify sectors and companies that benefit from these long-term changes, whether they are classified as large, mid-cap or emerging companies.
Historically, alpha generation often came from identifying undervalued companies early in their growth journey rather than focusing on size classifications.
Q) The factsheet highlights sectors such as energy transition, defence, aerospace and manufacturing as key focus areas. What makes these sectors particularly attractive from a long-term investment perspective?
A) These sectors are attractive because they are aligned with strong structural, geopolitical and political tailwinds. The energy transition is likely to accelerate further due to recurring oil shocks and increasing global attention to energy security and localization.
Defense spending is also expected to increase significantly over the next decade as countries prioritize autonomy and the transition of modern warfare from traditional platforms to drones, anti-drone systems and advanced technologies.
In aerospace and precision engineering, India has a strong structural advantage, driven by its engineering talent, cost competitiveness and growing role in global supply chains.
Q) The Indian manufacturing story is gaining global attention due to supply chain diversification and policy support. How are you positioning your portfolios to seize this opportunity?
A) The manufacturing sector is entering a multi-year bull cycle as the world shifts from an asset-light model to rebuilding sustainable assets and resilient domestic supply chains, creating long-lasting opportunities for globally competitive Indian companies.
We are positioning our portfolios to take advantage of this opportunity largely through “pick and shovel” companies – particularly the capital goods, industrial technology and engineering companies that enable this broader manufacturing development.
Our focus remains on identifying companies with strong execution capabilities, technological differentiation and the ability to gain market share as domestic investment and global supply chain diversification accelerate.
Q) As a firm managing over Rs 27,000 crore across mandates, how do you maintain agility and continue to generate alpha at scale?
A) Generating alpha at scale requires staying ahead of emerging trends while maintaining thorough research and strong risk discipline.
We prefer scalable businesses with strong execution and market leadership, which allows us to deploy capital meaningfully without losing agility.
Our “private equity lens” helps us develop differentiated perspectives, assess sectors with a long-term ownership mindset, and identify early signs when an investment thesis is evolving or being called into question.
We believe that intellectual agility and deep engagement with portfolio companies are far more important than trying to replicate benchmarks or cover every sector.
Q) What sectors or themes do you think are still under-owned or under-appreciated by the broader market?
A) Many of the most attractive opportunities today are still in relatively early stages of growth and often lie outside of benchmarks, which naturally leads to less institutional ownership and market attention.
The aerospace, precision engineering and AI/data center sectors are still early in their growth journey and are not fully reflected in market positioning.
Likewise, the energy transition continues to be considered narrowly despite the long journey and the evolution of the benefit pools that emerge in the ecosystem. We recently published a note highlighting the same.
(Disclaimer: The recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
