Sunday, July 14, 2024

Raleigh investor Himanshu Shah outperforms the market by targeting complacent management.

Himanshu Shah

Himanshu Shah has been running Raleigh’s Shah Capital Management for nearly two  decades, attributing his success to persistence — and he’s got the numbers to prove it.

Started in 2005, his hedge fund has averaged a 12% annual return, outperforming the 8.9% return of the S&P 500 index during the same period.

Shah, who manages about $600 million, is a rarity as an activist investor who buys significant stakes in companies that he deems undervalued, then prods management to make changes to push a
stock higher.

He just ended his most public campaign with a huge victory: shares of COVID vaccine company Novavax more than tripled in May, when it announced a licensing deal with French drug giant Sanofi. The transaction allows Sanofi to sell Novavax vaccine in most countries, providing the Gaithersburg, Maryland-based company with $500 million and future royalty payments. It sparked a huge return for Shah, who owned 8.1 million shares of Novavax on March 31, more than anyone other than giants State Street, Vanguard Group and BlackRock.

Shah Capital has outperformed the market since it was founded in 2005.

Shah, 57, ended his battle, which he believes had more than a 70% chance of succeeding, because “Sanofi was the best partner that they could have. Sanofi dominates the vaccine space globally. They have the marketing and the regulatory infrastructure that Novavax lacks.”

Shah Capital bought 715,000 Novavax shares in late 2022 when it traded for an average price of $17.65, according to, which tracks hedge funds. The stock sold for more than $200 for much of 2021 during the COVID-19 pandemic, peaking around $300.

Shah added 7 million shares in 2023 as the stock price dropped below $10. He says Novovax has “great science” but did not gain its share of the COVID vaccine market because it lacked the ability to market and distribute the drug. He nominated two independent board members in a proxy fight, calling the company mismanaged.

His shares were worth roughly $36.3 million before the Sanofi announcement, then soared to $164 million as of early June.

Calm and thoughtful Shah has repeated the formula of finding undervalued companies and pushing for changes for nearly two decades. “The most successful activists combine a calm, thoughtful plan with a serious threat to displace company leadership,” says activist investor and financial adviser Michael Levin, who serves on two company boards. “They want companies to understand an activist is prepared to escalate but would rather address concrete and material business improvements.”

Activist investors in North Carolina are rare. In the early 1980s, Charlotte auto dealer and NASCAR track owner Bruton Smith bought control of North Carolina Federal Savings & Loan and forced the resignation of its chair and president. The S&L was later seized by regulators in 1990.

In 1987, New York investor Asher Edelman made a failed but lucrative bid to buy Greensboro-based Burlington Industries, then the largest U.S. textile company. In 2012, Carl Ichan, perhaps history’s most famous activist investor, bought a $50 million stake and pushed for changes at mobile-phone company Motricity, then based in Durham.

Most recently, Durham-based Arjuna Capital, which also has an office in Boston, tried to get oil giant Exxon Mobil to accelerate greenhouse-gas emissions cuts, but was sued by
the company in January and ended up withdrawing its proposal. The firm, founded in 2013, has also battled Microsoft, Visa and Tesla on pay equity and environmental and sexual-harassment issues.

Earlier this year, activist investors gained board seats at Raleigh-based Advance Auto Parts and urged Durham-based Wolfspeed to consider “strategic alternatives.”

Activist investors, says Elon University finance professor Adam Aiken, “play an important role in monitoring and watching management of firms. If something is not going right, being able to step in as a shareholder and being able to suggest changes, [the company] can make operational changes that are beneficial.” Most activist investors try to work with management before taking their desires public, he says.

Shah became interested in investing as a teenager in India with some money provided by his father. He bought shares in what he calls the “Sherwin Williams of India” and tripled his money in a year. He graduated from Gujarat University in India with an accounting degree, then earned an MBA from the University of Akron in Ohio.

After working for UBS for a decade as a senior portfolio manager, he started Shah Capital in 2005 with $30 million from high net-worth investors and the Pennsylvania Public School Employees’ Retirement System. He had moved to North Carolina to be closer to family.

Shah is president and chief investment officer. His team includes Richard Callaghan, a UNC Chapel Hill MBA who has been a Shah staffer since August 2005, and research director Don Espey. Shah Capital hasn’t sought new capital for several years, and is now mostly working with high net worth families, including several of Indian descent. “We are a very focused investor, and that’s actually gotten more focused in the last five years or so,” he says. 

The firm often examines a company for as long as three years before Shah decides to buy its stock. “We really try to understand these companies from a management point of view, from an economic cycle point of view, from a macro point of view, from what’s the key advantage point,” he says. “What is my upside potential and my downside risk? That’s how we make our decisions.”

His firm invests in a dozen or so companies at a time. Most would be deemed too speculative by many money management firms.

An example is China Yuchai International, a subsidiary of Singapore-based Hong Leong Asia that operates in China. In 2009, Shah collected a 6.2% stake and joined two other investors pushing the New York Stock Exchange-listed company to seek changes. Shah wrote directors that shares, then trading at $18, were worth more than $50.

Shah asked China Yuchai to buy the remaining 25% of its main subsidiary, a machinery company, and sell its 50% stake in its real estate company, as well as an 8% holding in a consumer electronics distribution business.

Now, the company still owns its manufacturing business and real estate operations, and the stock trades at about $8.40, near its lowest level in the past 15 years. Management has been “extremely indifferent” to his requests, Shah says.

China Yuchai meets “all of the criteria for a successful investment,” says Shah. “They have the technology. They have the distribution. They are operating in pretty much a three-player market, kind of an oligopoly. But the stock price has not gone up. We have not been able to convince them to do a lot of things we think they should be doing.”

As of March 31, Shah Capital owned China Yuchai shares worth about $35 million.

Shah had more success when he led an investor group that offered to buy Chinese telecommunications company UTStarcom Holdings in 2013 for $125 million. The company sells cable TV and telecommunications services. Shah eventually owned more than 26% of UT Starcom’s shares, but after much effort, withdrew its bid to take the company private. Shares have declined nearly 80% over the past five years, but Shah got out in time. “We did OK on the investment,” he says.

Levin says company reaction to activist investors “ranges from tepid curiosity to vivid anger, on average with resigned indifference. They often view investors as a nuisance rather than as the ultimate owners of the company.” He adds, “They prefer shareholders to merely trust them, whether or not they deserve that trust.” Shah describes his strategy as “dynamic and pragmatic. Easy words to use, but very difficult to follow. We haven’t been successful all the time.”

Turning on the gas
Shah scored with The Vitamin Shoppe, a New Jersey-based retail chain of nearly 800 stores selling nutritional supplements. It bought a 14.3% stake in 2017 and Shah joined the company’s board a year later after he agreed to vote for its director nominees. Vitamin Shoppe approved a turnaround plan and was sold in December 2019. “Retail business is tough,” says Shah. “We made good money,
but it wasn’t a home run.”

Shah hit it out of the park with Antero Resources, a Denver-based natural gas producer that mainly operates in West Virginia and Ohio. Shah bought 1.9 million shares in late 2019 at an average price of $2.55 per share, then reached 10.2 million shares in mid-2020 at an average price of $3.17, or about $32 million, according to, which tracks hedge funds.

Antero shares soared to more than $20 a share in 2021, pushing Shah’s stake to nearly $100 million late that year. He sold incrementally as the stock peaked at more than $40 in 2022. He closed his position late last year with shares still trading for more than $25.

“I liked the management,” he says. “They were committed, and I want to underline the word committed. They had some short-term issues because natural gas prices came down quite a bit, and there was too much supply. And they had some debt coming due in a few years. Most investors had given up on them.”

Before Novavax’s stock soared, Shah’s top holding was Netherlands-based Veon. At the end March, 2024, he owned 5% of the company, worth nearly $119 million. It provides telecommunications and internet services in Bangladesh, Kazakhstan, Kyrgyzstan, Pakistan, Ukraine and Uzbekistan. “They completely dominate these markets,” where population is increasing, he says.

Shah asked the company in 2023 to make changes, including cutting costs at the Amsterdam headquarters and reducing its board by one member. He also asked for a stock repurchase and divestment of some operations. (Veon sold a Kazakhstan unit in 2023.) The stock has gained 35% over the past year.

“That is a company that is coming through on a lot of the things that we told them to do more than a year ago,” says Shah. “Here you have a company that is very receptive to our strategic suggestions.” Veon didn’t respond to a request for comment.

Another large holding is Emeren Group, a solar panel company based in Stamford, Connecticut. Shah owns more than 18 million shares of the company, but its price has fallen nearly 50% in the past year and now trades below $2 a share. He blames high interest rates, noting that solar panel companies borrow lots of money to build farms. “We’re living in a world where solar is going to play a higher role in the energy mix,” says Shah. “Emeren has a very strong balance sheet, with only 10% debt to equity. It’s only a matter of time before it significantly starts outperforming.”

Shah also invested in Raleigh-based Marius Pharmaceuticals, where he is executive chair. In 2022, the private company received U.S. Food and Drug Administration approval for an oral drug to treat deficient male testosterone. The deficiency affects approximately 40% of men older than 45 years of age and as many as half of males who are obese or have Type 2 diabetes.

“Himanshu’s deep experience has helped shape Marius into a disruptive company not just in pharmaceuticals but as we approach health care holistically,” says his cousin Shalin Shah, Marius Pharma’s CEO . “He has enabled us to execute creative solutions to widespread issues which we see panning out particularly well.”

Shah calls Marius and Novavax “preventative healthcare” companies, which he considers a growing investment trend because they can reduce healthcare spending. Research shows a link between testosterone deficiency and higher death rates. “That is why we invested in Marius, and I think we are turning the page,” he says, suggesting an IPO could happen within three to five years.

Shah says his investing style often involves fighting a battle. “Companies are like people,” he says.“They are hard to change and difficult to convince. So you accept your fate, if you want to call it that, because they’re not listening to you, and you hold on to [the stock] because you see a lot of upside.

“Or you sell out and move on,” he adds. “There are a lot of other investment opportunities out there.”

Chris Roush
Chris Roush
Chris Roush is executive editor of Business North Carolina. He can be reached at

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