Financial Freedom Summit 2024: Which three filters Vijay Kedia uses in stock selection?

During Money9’s Financial Freedom Summit 2.0 in Mumbai on February 14, 2024, in conversation with Anshuman Tiwari, Editor of Money9, ace investor Vijay  Kedia threw light on his investment mantra. In response to a question  as to three things Kedia avoids while investing, the market master highlighted his following three mantras:

a. Kedia said, he doesn’t invest in new companies. He invests in only experienced companies.

b. He then said he doesn’t invest in high-debt companies with poor track record.

c. Kedia then disclosed his third investment mantra. He said he doesn’t invest in operator-driven companies. He lets go of such companies whose promoters don’t have good track record. He doesn’t put his fingers in corporates in which promoter holding has driven share price rallies.

Money9 Editor Tiwari then asked Kedia “What filters you put while selecting stocks? On this, the shark investor reminded the public in attendance about one of his famous quotes on “bhangar caps”. He said  “There are large cap companies. Then, there are midcaps. There is small caps and then there are bhangar caps. 4,000- 5,000 companies out of 6,000 companies in the market are bhangar caps. I keep a watch only on 500-1000 companies.”

Kedia who is founder of one of the country’s leading stock broking firm, Kedia Securities Pvt. Ltd also disclosed that he also uses sports angle in stock selection. He said, “Companies which are like athletes with good track record in past. But has got out of form, but, still has skill, then I wait for like 5-10 years. If I feel better days are back then the company can again rally a lot.”

Tiwari then asked him which stocks have given maximum return in his portfolio. Kedia disclosed one of his investments gave 16,000 times return in 18 years. During the holding period, about  two-third of his investment in the stock got wiped off  in between but still he held on to it and eventually his investment amplified 16,000 times over the course of 18 years. So, he emphasised on importace of long term investing.

Kedia was then asked to tell about his exit strategy in a stock. On this he said he uses his learnings  from Hindu mythology ‘Ramayana’. He  gave example of the character of  Vibhishana  who had invested in his elder brother Ravana who was like a company with AAA ratings. But Vibhishana then took side of Rama who was like the latest company with AAA ratings. Kedia said he uses Vibhishana’s methodology in switching stocks.

Second methodology Kedia uses in deciding whether to leave a company is focus of its management. Kedia said he exists a company if he feels the management has lost focus.

When Tiwari asked Kedia whether he invests in IPOs or not? The marquee investor  said “I don’t invest in IPOs because companies’ pre-IPO investors  squeeze all the juice in it  before they put shares on offer to retail investors in the IPO.”

Tiwari also asked Kedia on his opinion on current concerns regarding the high debt levels of companies in the country. Whether he buys zero-debt companies or not? To this, the ace investor replied “Zero debt is not a compulsory parameter. I can invest in companies with high debt levels but fundamentals must suggest that the corporate has capacity to payback the debts. Even if company is reeling under high debt burden but is capable of paying back debt then I may invest in it.”

The Financial Freedom Summit 2.0 by Money9 was held in Mumbai. In this special summit, answers to every question on insurance, banking, investment, earnings, expenses, and savings were asked. Leading business tycoons, CEOs, CFOs, and investment experts answered all such questions.