For veteran investor Vijay Kedia, picking stocks is a matter of ticking boxes on his three-point checklist: the company should be light on debt, must have a trustworthy business model and an element of futuristic technology.
Kedia determines his investments based on how convinced he is about a particular stock’s potential, undeterred by uncertainties or the movement in indices. “The idea is to find shares which would do better than other, where you have less fear than in the sector where there is more fear,” he told BloombergQuint in the latest episode of the special series Alpha Moguls.
His approach is to focus on individual shares rather than just being sector-specific. “I just look at things—products and services—that will continue to be there, and prove to be sustainable,” Kedia said, adding that he keeps changing his investments from time to time if he loses confidence in a stock.
However, debt is the most important filter for the Mumbai-based investor to determine which companies to invest in. “I go for shares which have very less debt in their books.”
When I find that the fortune of the company is going to turn around, that time I will buy the shares whether it’s below the peak or it’s at new peak doesn’t matter to me.Vijay Kedia, Founder, Kedia Securities
Here are the stocks that Kedia has invested in and has avoided:
Disclaimer: The companies mentioned here are Vijay Kedia’s personal investments and should not be construed as stock recommendations.
Stocks That Kedia Has Invested In
Zee Entertainment
The investor purchased the stock for its cheap price, diversification into a future-proof streaming business and because it’s largely debt free.
“Going forward this company should do well because of the OTT and because people living in this pandemic are watching television, and they’re the largest in their field having 18% market share,” he said. “It’s also a debt-free company. So looking at all those parameters, I bought Zee Entertainment, although it isn’t a recommendation.”
Zee5 is Zee Entertainment’s OTT platform.
Tejas Networks
Kedia has an optimistic outlook for companies promising tech advancements.
“I bought some shares in Tejas Networks because they’re into telecom and now they are manufacturing equipment for Fibre To Home, 4G and 5G. As you know, Fibre To Home is the future and the new disruption after the WiFi technology,” he said. “It’s a technology company and a debt-free company. Its stock price, which once was Rs 500, fell down to Rs 35 or 40.”
The potential at that price made it an attractive stock for Kedia.
Repro India
Kedia says that although Repro hasn’t yielded high return for him so far, he continues to have faith in his choice. “As long as the underlying story is still intact and I think story in Repro is still intact, I’m very comfortable in Repro.”
Neuland Labs
Another cheap stock that Kedia preferred over its peers is pharmaceutical firm Neuland Labs.
“I found that the stock was very cheap. When I’m getting something which fits into my parameter valuation wise and debt wise, then why should I buy something which is expensive and which is not going to give me peace ultimately?”
Stocks Kedia Has Avoided
InterGlobe Aviation
Although appreciative of the business model, Kedia steers clear of bidding on airline companies. “These big companies have big debt and they’re working on a very thin margin,” he said. “One event like this pandemic, one crisis, can shake the company upside down and it can wreak havoc for them.”
PVR Cinemas
Kedia stated the same reason as airlines’ for not investing in the multiplex. “Of course, they are having a good business model but I don’t go for such kind of stocks.”
Bharti Airtel
The investor said that telecom is still undergoing continued disruption. Although opportunities in Bharti Airtel and other providers look endless, Kedia said that he isn’t comfortable buying these shares.
“The sector which is providing you very big opportunities, it is not necessary that all the shares in that sector will do well. That also does not happen because the idea is to identify a company when it is growing vertically, not horizontally. So, when companies start growing horizontally that means you are not going to multiply your money.”
Watch the full interview here:
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