Vijay Kedia Discusses His Favourite Stocks & Investing Strategy

Stay bullish. Sensex target is 1,00,000 by 2020:

Even if the Sensex grows by 20% a year, we will be 1,00,000 by 2020. The growth should be bit more than 20%. We are in that inflection point. Earnings and growth will come back.

Party has just begun. We are running a marathon, not a sprint. Don’t worry about short-term fluctuations. Instead, take advantage of dips to buy more stocks:

Does it make any difference that the benchmarks are volatile? As far as I am concerned, short-term predictions in the market are very difficult for me to make. I am not good in playing poker. To me, market means a long-term play. I still maintain that the party has just begun. We are running a marathon and not a 100-metre race.

It might take some time because as people think that things are not happening at the bottom, so let it not happen. You are getting an opportunity to invest, but if you believe in India story, then you should buy shares for long term and sit tight.

Earnings will follow and that is why you will get your quantity. If I am looking from my own perspective, if I have to buy a certain quantity, then this is the time only when I can get the quantity from the market. If everything is very good, then you will not get your quantity in the market. So this is the time to spread your investments.

Don’t look for complicated (or hidden) stories; look at well-known stocks with a simple business model:

People who have hurt themselves prefer Dettol over Savlon because the former stings and stinks while there is no reaction when appyling the latter. People believe that because Dettol stings and stinks, it must be “more effective” than Savlon.

Similarly, in the stock market, investors are loath to buy stocks which are already well known and famous. Instead, they look for “complex” stocks which are “unknown” in the belief that they will get returns from such stocks.

Always buy for a minimum holding period of five years:

All my investments are for minimum five years. I may change my mind if something changes, but I am buying from the horizon of five years.

Change in strategy from concentrated portfolio to diversified portfolio is only because of lack of opportunity to load up on favourite stocks:

The strategy of having nearly one dozen companies with more than 1% to 2% equity instead of a concentrated position in a few stocks is because I am not getting adequate quantity in the market and I do not want to keep my money idle in the bank. I am not a FD person, keeping money in FD or in loan. It bothers me if I am keeping my money idle. So till I get a good story, it is better to keep your money into stocks. Whichever idea I like, I invest in it. Even if it is 1% or 2%, it does not matter till I get a story of 15% or 20%.

I do not have a price target for any of my investments.

Be Patient – Don’t bother about rises and dips (as long as the spring is there, let the flower bloom):

Suppose, after six months, if Sudarshan becomes Rs 200, how does it matter to me? The appreciation will be in the books only. I am not going to sell my shares even if it becomes Rs 500 tomorrow. I am not selling Cera Sanitaryware even if is at a PE ratio of 55. Let it be as long as the spring is there. Let the flower bloom.

Management is the primary consideration when buying a stock:

Management is the primary criteria for buying a stock. They must be seasoned and with experience over 25 to 30 years of 5 to 6 economic cycles. If the management is good, they can do wonders for the business. Also, look for stocks with a good product.

Pharma stocks: I never bought a Pharma stock in my life because I don’t understand the business model.

Cera Sanitaryware – Even though valuations are stratospheric, I am not selling the stock because there is earnings visibility:

I am holding Cera Sanitaryware for the last 10 or 12 years. It is quoting at a PE ratio of 55. So it is a mouth-watering valuation, you can say. I have sold some shares, but I am not a seller at this price.

Even at a PE multiple of 55, I am not selling because other stocks like Bosch, Eicher Motors, Page Industries and there are so many other consumer companies quoting at a hefty price, hefty valuations. So if companies are going to grow by 30%, suppose even 25%, then a PE ratio of 25 or 30 or even 25 is reasonable. Maybe it will catch up. So I am not selling my shares, although I am selling in a limited quantity, but not selling 100% of my holding in Cera Sanitaryware.

But also avoid buying high P/E stocks like Cera Sanitaryware:

But I am not a buyer of Cera Sanitaryware at this price. Why do you want to follow those stocks which are quoting at a 50 PE ratio or 40 PE ratio? The market is full of stocks, good stocks, which are available at comparatively cheap valuations. You should buy those shares.

Amrutanjan – 30% growth expected. Part of a 5-year portfolio:

Though consumer stocks are perceived to be very expensive, Amrutanjan is still available at a PE multiple of sub 30 based on FY16 earnings. When I bought Amrutanjan first time it was 350 or something. So that was sub 20 PE. This is a 135-year-old company run by a classic management. But I feel now the management has woken up. They have predicted that they want to grow at 30%. They have introduced new products also, not only the pain balm and they are coming out with some juices, some sanitary napkins and all.

Sudarshan Chemicals – good management, good product, reasonable valuations:

I am holding more than 4%. Last week I bought some shares some FIIs were selling. I like this company for the reason that the management is very good, product is very good, it is a research-based company and their capital to sales is very lucrative like 7 crore of shares and having a sales of Rs 1200 crore.

Though the Q3 & Q4 numbers may show huge inventory loss because crude is down, it doesn’t matter. Crude prices are unpredictable and when I bought the stock, I did not know that crude prices are going to come down to 40 or 50. So that could be an advantage for the company. It will have its own advantage. May be that advantage will come later, may be after two quarters, after three quarters.

Aries Agro & RCF: Aries Agro is a long-term idea because a time will come for using less urea and more micro-nutrients. RCF is a world class company. In the last ten years, no urea plant has been set up.

Bharat Electronics: It is a safe stock with a margin of safety. It is a PSU with a proven track record.

NBCC: Though the stock is a 10-bagger, there is no intention to sell it. It has a good business model with good operating margins.

Three high-conviction “safe” stocks to buy and forget:

Repro: The model to digitize textbooks will pay off in the next four to five years. Bharat Electronics & Sudarshan Chemicals are also safe stocks.