Vijay Kedia Is Right In Advising Us To Buy “Simple” And “Safe” Stocks

In his ET interview, Vijay Kedia jokingly remarked that rank and file investors don’t like “simple” stock stories. Instead, they are always seeking “hidden” or “complex” stock stories.

With his earthy wisdom, Vijay Kedia cited the example of how people prefer Dettol because it “stings” when you apply it over a wound. In contrast, Savlon, which has the same medicinal properties, is disliked because it has no stinging effect. People assume that Dettol works “better” because of its sting.

Likewise, in investing, if you tell someone to buy a well-known blue chip stock, he will look at you with contempt. But if you tell him to buy a micro-cap stock with unknown credentials, he will rush to buy it without a second’s thought, Vijay Kedia said with a big grin on his face. Investors somehow assume that the well-known stock will not deliver any meaningful returns but that the unknown stock will deliver magnificent returns.

That analogy can be applied to Salzer Electronics as well. I reported in April 2015 on how this micro-cap stock, which is backed by L&T, the blue chip behemoth, is a no-brainer. Apart from top-quality management, Salzer had outlined ambitious growth plans and revealed that it intends to grow at 30% CAGR over the next couple of years. I also pointed out that Vijay Kedia had bought a chunk of 200,000 shares. I also hinted that Vijay Kedia is right in calling Salzer a “safe” stock due to its impeccable parentage and generous dividend payout.

Well, on that day, Salzer was at Rs. 227. Today, Salzer sprang nearly 15% to rest at 312. The total returns in the past couple of months is nearly 40%.

From the confidence of the management, it does look like the promise of a 25%-30% CAGR in growth will be met.

In addition to Salzer, Vijay Kedia personally handpicked three “safe” stocks especially for us. These are Bharat Electronics, Repro and Sudarshan Chemicals.

Pennar Industries is another stock which deserves mention as a “simple” stock with great promise.

I reported yesterday on how Daljeet Kohli had promised huge “value unlocking” from Pennar Industries.

To everyone’s surprise, Pennar surged nearly 12% today, indicating that Daljeet’s logic is indeed convincing.

So, the moral of the stock is that we don’t have to go far and wide in our quest for winning stocks. Sometimes they may be right under our nose!