It is rightly said that we must learn from other people’s mistakes. Life is too short to make all the mistakes yourself. And who better than the stock market legend Vijay Kedia to learn from.
In this article, we will learn how Vijay Kedia picks stocks and approaches his investments. We will also take a look at Vijay Kedia’s stock selection philosophy and current portfolio.
In this article
- Vijay Kedia – Background,
- Top 5 or key investment lessons from Vijay Kedia
- Investment Framework – SMiLE
- Stocks example picked with SMiLE Framework
- Vijay Kedia Portfolio and recent additions
- Call to Action
Vijay Kedia – Background
Vijay Kedia’s journey is a quintessential rag to riches story. Born and brought up in a Marwari family, he grew up to be a keynote speaker at IIM Ahmedabad and IIM Bangalore.
He is living proof that an academic degree does not guarantee success in the stock markets. He started gathering experiences and combating failures, as early as the age of 14. That led Vijay Kedia to became a self-made, prominent, trader turned investor.
Finding the right investments isn’t just about making optimal choices at the right time. It is an internal search about finding what works for you. Similarly, the right time is equally about patience as it is about resilience. Just like all of us Vijay Kedia too had fairly volatile challenges pitched at him by life. However, failure makes us resilient enough to stay on the pitch and play. Let’s learn from Vijay Kedia’s life experiences.
Key Investment Lessons from Vijay Kedia
Stop-loss – the ultimate immunity
For Vijay Kedia, beginner’s luck played an important role for the first six months. He flared at his work and in no time, he learned the tricks of the trade. However, his beginner’s luck started falling out and his losing trades outpaced his winning trades.
His losses were so huge that his mother was about to sell her ornaments. Somehow, Vijay Kedia was able to dodge the situation. This incident taught him that nobody is invincible. It’s true that lessons which last comes with a cost. Vijay Kedia’s biggest investment lesson was to place a stop-loss while trading. He says without stop loss a trader cannot survive in the market. A trader can make money in many trades but can lose all the money in a single trade if he doesn’t use stop-loss.
Market rewards independent thinkers
Vijay Kedia had a first-hand experience of the Harshad Mehta orchestrated bull run. He invested his entire portfolio worth Rs. 35,000 in ACC Ltd in early nineties. The stock moved up ten times in a year. This was the start of what made Vijay Kedia an awestruck Indian Investor.
Investment is like Yoga
His investment mantra is to – ‘Buy like a bull, sit like a bear and watch like an eagle. Oftentimes, reacting to the current market outlook is not the right thing to do. Investors should try to understand when it’s time for them to sit back and watch.
Art of picking stocks combined with pure patience
One such situation was where Vijay Kedia identified Aegis Logistics at Rs.20 and bought a 5% stake for the very first time in his life. For the next year stock barely generated any returns. Finding a gem isn’t enough, finding the courage to stick through without fear and disappointment is. Eventually, the market realized its worth and valued it at Rs. 300.
Spot industries where the sun rises and exit industries where the sun is setting.
While there are ample investment lessons to be learned from Vijay Kedia, the one which struck me the most is that he has never invested in cyclical companies. He says that he has never understood their business cycle.
With the unreliability in demand, these cyclical businesses tend to set into heavy diversification or stop focusing on core aspects. It is best to avoid such businesses.
Vijay Kedia’s Investment Philosophy
A majority of his investments are based on the SMiLE philosophy. Vijay Kedia’s unique investing skills and this priority mechanism to analyse stocks has rewarded him. And valued his current portfolio beyond Rs.1,000 crore!
SMiLE– Vijay Kedia’s Style
S – A company small in size
You must not misunderstand this as a small-cap company. Small in size refers to the company’s market share to the total market size of the industry.
Market Share = Total sales of the particular company / Total sales of the market
The vision of a small company is essentially to acquire a greater market share of that particular market segment. Therefore, if the market size of the particular industry or segment holds immense potential, then the growth of small companies in that market segment seems achievable.
Mi – Management with medium experience
The management should have a clean track record with a drive to grow the company and create value for all the stakeholders. Vijay Kedia looks for management with 15-20 years of experience. Management would have gone through about 2-3 down cycles in these 15-20 years. This makes the management stronger and capable to drive the company in right direction.
L – large aspirations.
According to Vijay Kedia management is one of the most important things to be looked at before investing in a company. For a company to upgrade from small size to medium size, the management should have large aspirations. Management must be aggressive, transparent, and dedicated to the business. He looks for managements which have fire in the belly. If management aims to become a billionaire only then the shareholder will become a millionaire.
E- extra-large in market potential.
Vijay Kedia would prefer a fish in an ocean rather than, a crocodile in a pond. A company close to reaching its market potential doesn’t have much room to grow.
However, a stock with a limited market share but growing market is much more likely to generate better returns.
Vijay Kedia says that for a company to grow from small size to medium or from medium to large, the market and the underlying asset should have that potential.
He tactfully adds that one cannot get a small company that is cheap and has prime return ratios too. Learning the core qualities of the business model. Focusing on the underlying story of the stock and the industry. Helps Vijay Kedia calm his reflexes and remain invested through the thick and thin of the business cycle, given the illiquid nature of these companies.
Stock examples picked with SMiLE framework
Investment in Tejas Networks (2021)
Vijay Kedia bought an additional 1.18% stake in the company in March 2021. His firm Kedia Securities Private Ltd. owns 4.17% stake. Thus, his total stake in the company is 5.35%. Tejas networks manufacture future-ready products for building high-speed communication networks that carry voice and data.
- Formerly, it was small in size heavily dependent on government orders. Management has consciously made efforts to enhance the order book. And it is now focusing on private and international customers.
- Fiber to the home rollouts is another set of applications the management has persistently worked towards. And the company has now been selected by all major operators for the same.
- Needless to say, the growth potential in this industry is now greater than ever. Growth momentum also continues on the international side with new customers in Asia, Africa, and the USA.
Investment in Sudarshan Chemicals
Vijay Kedia entered Sudrashan Chemicals in 2014 at Rs. 42 and then again at Rs. 82. Apart from management being transparent and adaptable, the core USP is the extra-large potential in this segment. Chemical is the next pharma industry. Sudarshan Chemicals is one of the very marginal affected company amongst its peers
- Sudarshan Chemicals was a small company dealing with organic and inorganic pigments. It has been maintaining net Profit margin and sales growth for the past 5 years.
- Management aspired to become 4th largest player in pigment business which they achieved.
- Due to the shutdown of chemical industries in China, the extra-large market potential has unravelled.
- Management stated an incremental capital expenditure project to boost revenue growth in their recent con-call.
Vijay Kedia’s investment philosophy hits a perfect cord into mid-caps as they are comparatively cheaper and the probability of multiplication is higher!
Vijay Kedia’s Current Investment Portfolio [June 2021]
|Script||Shareholding (inpercentage)||Recent Transactions||Industry|
|Atul Auto Ltd.||1.47||2/3-wheeler|
|Chevlot Company Ltd||1.29||Jute & Jute Products|
|Elecon Engineering Company||1.19||Increased stake||Industrial Manufacturing|
|Heritage Foods Ltd.||1.13||Increased stake||Packaged Foods|
|Lykis Ltd.||9.33||Home & Personal care|
|Mahindra Holiday Ltd.||1.02||Fresh buying||Hotels|
|Neuland Labs Ltd.||1.01||Pharmaceuticals|
|Panasonic Energy Ltd.||1.24||Non-Durable Household Prod.|
|Ramco Systems Ltd.||1.81||Increased stake||IT Consulting & Software|
|Repro India Ltd.||7.48||Increased stake||Comm. Printing/Stationary|
|Sudarshan Chem. Ltd.||1.44||Specialty Chemicals|
|Tejas Networks Ltd.||1.18||Other telecom services|
|Cera Sanitaryware Ltd.||1.04||Furniture, Furnishing Paints|
|Vaibhav Global Ltd.||1.84||Fashion Jeweller & Lifestyle products|
|Affordable Robotic & Automation Ltd.||13.25 (March 21)||Industrial Machinery|
|Innovator Façade Systems Ltd.||10.66 (March 21)||Construction & Engineering|
Vijay Kedia’s Mantra for Success in the Markets
The most important thing to keep in mind with all your investments is to keep at it and not allow small market downturns to discourage you. It is almost inevitable for your investments to take a hit when the market is having a rough time.
There are 3 moods of the market:
Conquering the fear, learning to be patient and having absolute faith in your investments for longer-term is crucial for wealth creation.
Key Investment Quotes from Vijay Kedia
- All your profits and losses are theoretical unless they are booked or locked. Money isn’t yours until you sell the stocks.
- Always use stop-loss while trading
- Keep a long-term vision as it takes a while for a small-sized company to grow into a medium-sized one.
- Don’t fall for fame and glamour. Instead aim to catch stocks while they’re young. Once its true value comes into the limelight, the valuations will shoot up!
- Invest in businesses that you understand. Avoid following the trend or herd-investing.
- The market rewards you as per your perception about it. If you treat it as a gamble it’ll prove to be a gamble for you.
- Have a fixed income, apart from the market gains for your livelihood.
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