Dalal Street veteran Vijay Kedia’s stock investment principle: SMILE

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Well-known value investor, Vijay Kedia, entered stock market at the age of 19, but after spending more than 30 years on Dalal Street, he still identifies himself as “insecure, mediocre and fearful” when it comes to investing. 

“Even if I were to apply all the correct formulas, principles and metrics which have given me success in the past, a positive result is not guaranteed. So, that insecurity is always there,” Kedia said. 

The managing director of Kedia Securities shared his portfolio details and investment style for the special annual Mint series — Guru Portfolio. 

The Dalal Street veteran revealed that his success in picking stocks is not more than 50%, while only one or two of 10 stocks become multi-baggers. 

Kedia has up to 90% of his portfolio in equity, around 8% in real estate, and 2% in gold and silver. “I don’t invest in debt. Suppose I had to sell some shares, I would put that into a liquid fund or a fixed deposit account for 10-30 days. I don’t get any sleep if I have cash money with me,” he said. 

The expert adheres to ‘SMILE’ as a principle when selecting stocks, which translates into small in size, medium in experience, large in aspiration and extra-large in market potential. Based on this principle, the value investor has built an equity portfolio, which is 90% into small-cap and mid-cap stocks. 

Kedia, who doesn’t usually invest in large-caps, is keeping some of his liquidity in these stocks. “I’m looking for an interesting story in small and mid-cap spaces, and if I find some opportunity tomorrow, I will immediately switch,” he said. One stock idea, he says, that worked over the past year is Tejas Networks, and one that didn’t was Ambika Cotton Mills.  Still, the past one year has been underwhelming for Kedia, as his equity holding hasn’t witnessed any appreciation since May 2021. “I don’t look at returns on an yearly basis. My stocks have seen good appreciation. Some stocks that I bought in 2020 are up 10 times. But since last May, due to market conditions, the stocks have been trading flat,” Kedia said.

As a rule, Kedia doesn’t keep a tab on returns from realty investments also. “Real estate is a long term investment for 10-40 years, and for me, this investment is very occasional,” Kedia said. 

The main idea behind Kedia’s real estate investment, which includes two warehouses, is to generate monthly income, as he doesn’t want to be dependent on the stock market income. 

Kedia, who constantly reviews his equity portfolio, is looking to further increase allocation to stocks because he reckons that the “lackluster 2022″ would offer a lot of opportunities.

Interestingly, Kedia, who has never invested in international stocks, is planning to pick Google as his first overseas bet. He believes that investing a maximum of $250,000 (yearly cap under the Liberalized Remittance Scheme) in overseas stocks would not have a meaningful impact on his portfolio. Apart from Google, Kedia is not interested in buying any other technology company in the US market. 

Kedia doesn’t provision for any emergency fund as he gets a reasonable amount in the form of dividends and rent, “which can take care of household expenses.” 

Kedia owns three yoga and wellness resorts in Rishikesh, Goa and Kerala. He plans to visit his resorts in Kerala and Rishikesh soon.  Kedia also revealed that he is more focused on spiritual things and thinking after the covid pandemic,  and is trying to be a calm and healthy person.

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