A sunflower with a smiley face imprinted on it grows in a field. (Photographer: Yuriko Nakao/Bloomberg)

Dalal Street Veteran Vijay Kedia’s Secret To Investing Is SMILE

Bet big and ride through tough times is the advice from veteran investor-trader Vijay Kedia.

While luck plays a big part in stock market investments, knowledge, courage and patience are the cornerstones. Kedia, in fact, likes it when stocks don’t move too quickly after he has made the first purchase. “I usually buy a stock that I know will not gain for the next six months,” he said on BloombergQuint’s special show Alpha Moguls.

The quality of management plays an equally important role. He doesn’t hunt for stocks that are cheap because the management is weak. For an individual investor, buying a quality management is important, and feasible, because he or she doesn’t have to buy a large number of companies. Which means, investors aren’t pressed to go looking for weaker managements as they have well-managed companies already in portfolio.

Kedia has crunched all that into what he called the SMILE approach to investing: that’s ‘small in size, medium in experience, large in aspiration and extra-large in market potential’.

“I don’t give much importance to return on equity, return on capital employed and other ratios. You cannot get a small company which is cheap and has prime return ratios,” he said.

I need managements which are clean, having a fire in the belly and there is potential for the company to grow for the next 15 years.
Vijay Kedia

Kedia says it’s very difficult to find stocks which are neglected and investors won’t find too many hidden gems. Patience will help in generating alpha, he said. And that’s important because he expects 2018 may be a tough year for Indian markets due to the possibility of an earlier election.

To believe in the story, to stick to the story and sail through the tough times will be the alpha.
Vijay Kedia

Kedia expects to hold his portfolio companies like Sudarshan Chemicals Industries Ltd. and Repro India Ltd. for the long term. He doesn’t have a price target or a time target for any of his holdings. For him, information technology may be the dark horse and disruptive technology companies may do well over the long term.