How to invest like Vijay Kedia

"Life is a blessing when you don't compare investing with casino and horse racing".

The quote encapsulates what propelled Vijay Kedia, the founder of Kedia Securities, to stardom: wit blended with valuable investing insights. Kedia's use of humour helps make complex financial concepts more accessible to a broader audience, a goal we, too, share. In addition, he focuses on long-term value investing, a philosophy we also follow.

So, we decided it was time to dig into how he views investing, particularly SMiLE, a simple yet potent strategy he champions.

Let's delve into the core principles of SMiLE and how they reflect Kedia's investment ethos.

S - Small-sized company

Don't let the name fool you. Kedia does not say that a company must have a low market cap to be a prospective investment. Rather, his emphasis is on a company's market share in its industry.

A small budding company setting up to expand its market share in an industry ripe with growth opportunities - that is what you should be looking for, says Kedia.

Mi - Medium experience

In simple terms, medium experience means you should look for a management team with a mix of seasoned wisdom and willingness to evolve.

The logic is simple. If a management is too experienced, it might not be willing to change as per the market demands. If it is constantly jittery and evolving, it may burn out quickly.

So, Kedia prefers management teams with 15-20 years of experience, a sign that they have survived several economic downturns and learned to adapt and change.

L - Large aspirations

You must dream big to get big. According to Kedia, the company must have "fire in its belly" to go from small to medium and then medium to large. The management should possess qualities such as aggression, transparency, and dedication. Ultimately, it should be reflected in the financials of the company.

E - Extra-large potential

Rather be a small fish in a big pond than a large fish in a small pond. In simple words, Kedia prefers small companies in an industry with a large growth runway. He believes investors should focus on companies with a low market share in a fast-growing industry.

However, note that the company must possess the ability to increase its market share. Without that, the large pond will be of little help.

Beyond the SMiLE framework, Kedia underscores the importance of balancing valuation and return, as it is often difficult to find good companies at cheap valuations. So, the trick is to tread the line between the two cautiously.

The above is only a summary of his vast investing acumen. To learn more about how to invest like Vijay Kedia, watch these two interviews here and here.

Also read: Five iconic Buffett investing lessons

This article was originally published on January 25, 2024.