Does your portfolio 'SMILE'? 3 stocks on which Vijay Kedia is betting big

CNBC-TV18

The S&P BSE Sensex might have rallied over 25 percent so far in the year 2017 but the bull market has more legs and long-term investors should use dips to buy into quality stocks, Vijay Kedia of Kedia Securities said in an interview with CNBC-TV18.

Kedia, who is known on Dalal Street for spotting multibaggers, said that we are in the beginning phase of a bigger bull market. The first phase got over between the period 2003-2008, and the second phase started from maybe around 2014 – so there is a long way to go.

He strictly follows the methodology of ‘SMILE’ as a principle of investing in stock markets. Vijay Kedia who has been part of D-Street for the last 28 years, says SMILE refers to -- Small in size, Medium in experience, Large in aspiration and Extra-large in market potential.

Some of the stocks which have turned multibaggers in the year 2017 alone include names like Repro India, Everest Industries, Sudarshan Chemicals, and Aries Agro.

Other stocks in which Kedia holds 1 percent in companies include names like ABC Bearings, Vaibhav Global, Apcotex Industries, Cera Sanitary, Karnataka Bank, TCPL Packaging etc. according to September quarter shareholding data.

Here are some stocks which Vijay Kedia says could be next big bets on D-Street:

Repro India: Stock up 111% in 2017

Vijay Kedia who holds 6.78 percent stake in Repro India says that it could become a Unicorn in the listed space. The new journey of Repro has just started considering the fact that the market size of the sector is huge. It is a niche player in the printing industry.

The company itself projected in its annual report that they should be able to capture the market of 10-12K crore by 2022 while at present they have sales around Rs20-40 crore form that vertical. However, executions remain the key.

Sudarshan Chemical Industries Ltd: Stock up 22% in 2017

Kedia holds 3.5% stake in the company according to September quarter shareholdings data. The stocks might have tripled in the last two years but the rally is not over yet. The company is aspiring to become the third largest company in the pigment industry.

Aries Agro: Stock up 104% in 2017

Kedia along with Kedia Securities holds nearly 5 percent stake in the company. The company is into micronutrients business. Other big companies such as Rallies or Coromandel are also there but that is not their standalone business. The company is doing all the right things and are on the right track.

Below is the verbatim transcript of the Vijay Kedia's interview.

Anuj: Your Twitter bio says invest like a bull, sit like a bear and watch like an eagle. So, what are you right now?

A: Once a bull, always a bull. Ever since I am in the stock market, I do not remember any single day when I was not 100 percent invested in the market. So, I am always bull.

Anuj: You think the market still has legs to go and I am not talking about 3-6 months, in terms of this bull market, do you think we are in the starting phase, middle phase? Where are we right now?

A: We are at the beginning phase of a bigger bull market and maybe the first phase, which we saw between 2003 and 2008 and the second phase has started from maybe 2014, so a long way to go from here also.

Sonia: Talking about a couple of companies that you are bullish on, one of them is Repro India. I wanted to understand from you what the rationale behind this choice is.

A: I think you have the best person in your studio, Mr Pramod Khera who you are going to interview in a while. From a shareholder perspective, what I feel that this company is doing something unique and in my limited knowledge, I think this is the first company which is going to become, since it is not a startup, but I can use the word first company to become a unicorn in a listed space. So this is my, of course my opinions are biased because I am invested in this company. So I have vested interest also. What they are doing is the first thing happening in India in printing industry. So let us see now. You speak to Mr Pramod Khera, let me know what is his opinion about his own company.

Sonia: But I wanted to understand from you what kind of growth are you seeing for the industry as a whole and for the stock particularly given what it has seen in the past, how much more of upmoves do you foresee?

A: Actually the new journey of Repro has just started. So there is no benchmark for this. But what they are doing, the market size of that sector is huge. The company itself has projected in their annual report that the market size, maybe they should be having a market of around Rs 10,000-12,000 crore by 2022 and right now, they are having, maybe sales from that vertical, somewhere around Rs 20-40 crore this year. So there is a huge opportunity. The only thing is this that we only have to see how they execute that thing well. That is only to see.

Anuj: I want to understand this investment philosophy that you have of SMiLE where you have of course, Repro and Everest and Sudarshan Chemical Industries as well. For our retail viewers, if you would want to just explain that?

A: As you know, I invest in midcap and smallcap. So SMiLE means small in size because I never invest in largecap because it is very difficult to understand largecaps. So, company should be small in size and medium in experience because you are gaining experience along with the time, along with the size. You become experienced along with your size. So medium in experience and large in aspiration and extra-large in market potential.

Take example of Repro. It is still a small sized company, but the management is very optimistic, very ambitious and they have got the potential, they have got a big aspiration to become maybe number one company in their sector. So that aspiration is very important because if management does not have fire in the belly and does not have aspiration like for example Sudarshan Chemicals, five years back it was nowhere in the big-five in the pigment sector. Four years back, they said they aspired to become fourth largest company in the world in pigment. Now they are aspiring to become third largest company in pigment sector. So that aspiration is needed because if your management does not become a billionaire, you as an investor will not become a millionaire.

So that aspiration is also very important. And only aspiration will not give you anything until and unless the market potential is huge. So like Mr Khera will tell you that Repro's market potential is huge, Rs 12,000 crore only by 2022, so all this combination is very important to make money to create wealth in the market.

Anuj: From your point of view, what would be the key risk factors here because I was just looking at the numbers? Of course, stock market is about future numbers, but it is yet to reflect in the numbers, right?

A: Exactly. So as I said, if they failed to execute all these things well then that could be a risk in the business. But so far, I think beyond that I do not foresee any risk.

Sonia: The other stock you were talking about, Sudarshan Chemicals, that stock has more than tripled in the last two years. I know that does not mean it cannot go up further, but do you think most of the juice is already out?

A: I am biased, because I am invested in the company, so I do not think so because as I said in my earlier statement that the company is aspiring to become in 2014, they said they want to become fourth largest company in the pigment industries, so that they have already become and now, they are aspiring to become third largest company in pigment industry. The third largest company is having a turnover of around Rs 5,000 crore. So I think this is, again in my biased opinion and my limited knowledge, the second phase of this company is going to start maybe after 3-9 months, that I do not know, I cannot give you specific timeframe, but I think second phase is going to start soon.

Anuj: The other stock which has done well for you off late is Aries Agro. Do you remain invested in this one? Do you think it is the next big one for you and what is the story here?

A: I am still invested in this company so again I have vested interest. They are in micronutrients and so far my knowledge goes, I think this is the only company on a standalone basis which is into micronutrients. Other big companies are also like Rallis India and Coromandel, they are also into micronutrients, but that is not a standalone vertical for them and they are doing many right things. They are going into, they have started a vertical in hydroponics also and something into aquaculture for nutrients only. So they are doing right things. It may take some time, but company is on the right track.

Sonia: You seem to have quite a bit of fan-following, especially on Twitter. Just wanted to understand from you, are there any non-index largecaps that you would be interested in or you have been bullish on that have caught your eye lately? I know you invest mostly in small and midcaps, but any non-index largecaps that you have been bullish on?

A: I do not remember that I own any largecap in size but I am certainly looking for something into infrastructure space because I feel that you cannot imagine a modern India without modern infrastructure. So, infrastructure space generally companies are in largecap or maybe large midcaps. But I have not made up my mind so far. But I am open to it.

Disclaimer: The views and investment tips expressed by investment expert on moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.