Hello everyone, my name is Nrupen and in this video I'll try to explain investing method
of our favorite investor Sir Vijay Kedia.
First of all I will like to clarify that there is no written book or video course specially
created by Vijay Kedia himself to teach his investing method.
By the way, I have tried breaking down his investing method based on his interviews and
lectures that are publicly available on YouTube and websites of News Channels.
Vijay Kedia's investing method more of advocates investing in management of business and not
in business itself.
He says, "Good management in bad business is better than bad management in good business".
As per him good managements can make business work even when whole industry is suffering
from turmoil.
As example he explained how airlines sectors are in shit everywhere while Indigo is printing
profit.
His preferred businesses are those which can keep themselves safe against turmoils of its
own sector.
From it we can conclude that Vijay Kedia is more of Qualitative Investor and not the Quantitative
one.
He recommends not to completely depend on market as your source of income.
Always have an income source outside of market.
Always save from your income and invest part of savings in market.
Again he advises not to invest on borrowed money.
Market is risky place and there is no guarantee that money invested will surely turn into
fortune.
So first you must have savings, second you should only invest part of that savings and
third do not invest with borrowed money.
As per him you should invest for 5 to 10 years and do not expect better profits before that
time.
If you make profit early it is totally luck factor and you should not take credit for
it.
Always invest with best management and let them worry about growth, you don't need to
worry about growth of business.
Do not worry about bad times because good management adapts to all bad situations.
You should not bother about your investments, let the management of business bother about
them.
If management is really good, they will make sure your investment will flourish with their
business.
For him 3 things are important for successful investing.
First is knowledge, second is courage and third id patience.
He says he, "If you have No Knowledge and No Information about why you are investing
in a business then your are not investor but a gambler".
Knowledge is required to invest in stock market.
No academic degree can help you succeed in market, you can only become successful by
practice.
Stock market is not place for easy money, it is place where you work hard to to make
right moves and others live in delusion that you are making easy money.
While learning you might think, it is very easy to find and invest in stocks.
But while applying learned information you'll realize, the easier method will sound, the
harder it'll be to apply.
What's really easy, is least likely to work in market.
Next as per his experience market faces scam every 3 to 5 years.
New rules are made to patch loopholes after scam, still someone manages to find loopholes
and creates another scam.
Your investments can suffer during these times of market.
If your purchase price is low then you can face turmoils of market.
But for time bad times passes, you'll need lot of courage to hold your positions.
Finally patience is required because market makes money for you only in long run.
Market crashes are inevitable and they happen quite often, but every-time market crashes
it also recovers multiples times of crash.
In such cases patience is only thing that will make profits on your investments.
Now since Vijay Kedia invests on information he reads like 10-15 different News Papers
everyday.
Apart from that he keeps eyes on interviews of CEO of businesses.
As per him news informs you about revival of sectors long before revival actually takes
place.
Again rather than just reading news, you must also be able to connect dots provided by news
to reach right conclusion.
For example, if you found news that in some country demand for some food product is going
high.
Then you should be able to connect how that increased demand will attract export of that
product from our country.
For example, European countries are right now in trend for organic and less processed
food.
India being 2nd largest producer of all food items, that trend is surely going to benefit
agriculture sector of India and also of China which ranks first in production of food.
Though I am not totally an information investor I think it is the reason why he bought Aries
Agro.
Similarly you must be able to connect dots of important news to related sector.
It'll help you buy the business for possible best price.
He makes it clear that management do not talk with average investors, so average investors
should not live with idea that they can get information from business about their future
plans.
On other hand he advises to not listen to what management says because every time he
had listened to management he suffered loss.
This does not happen because management is corrupt, this happens because management themselves
are either busy to analyze information or incapable of connecting information to their
own business.
Some of them end up making and implementing expansion plans which are very much guaranteed
to fail because they are unaware of information that can adversely affect their business.
So do not listen to management, you do can read annual report but don't be over optimistic
on it.
Invest only on information that you have in hand, spoon feeding eventually fails.
No one knows future so do not invest in prediction.
Again he made it clear that he do not invest in IPO, he needs information about how business
performed before he invests in them.
Therefore, he says no to invest in them.
Finally he does not bother about Market Cap, with respect to Market Cap he keeps no personal
preferences.
On other hand he says, "A Cap is a Cap, and if business is capable of delivering profits,
size of Cap does not matter".
Strategy
After you connect source of information to what industry it can benefit.
It is time for you to pick stock from industry that is extremely likely to deliver better
profits.
Keep in mind market makes money for you only in bull market.
Therefore it is important for you to buy business that are already performing and wait for bull
market to push prices up.
During bear markets be patient and hold your stocks, sooner or later market will unlock
value.
A business worth buying is one which have very good management, a business is having
good management can be seen from the fact it manages to perform in spite of its industry
is under performing.
A good business does not only have good products but also good branding.
It usually holds Competitive Advantage over other businesses of its industry.
While making buying decision 50% marks should be awarded to good ambitious management.
Whereas rest 50% marks should be awarded for Good Product, Good Branding and Competitive
Advantage.
As per him if you know why you bought the stock in first place, there shouldn't be any
reason why you should not be able to figure out when to sell it.
First keep in mind the number that appears on screen is not your profit.
The profit is amount that you'll book after selling your stocks.
Just like Peter Lynch he also recommends you to invest in house first and then on anything
else.
In case there are two options in your hands, from which one is reinvest money and second
is buying house, then always go for house if you don't already have one.
Every investment is worthwhile only after you have invested in shelter for you.
As per him you should sell stocks in 4 scenarios.
First, sell if you really need money, second is sell if the reason for which you bought
that stock no longer exit.
Third sell if management losses its focus.
As example of management losing focus he told about his investment in Jai Shree Tea.
He invested in Jai Shree Tea because it was cyclic business and market conditions were
favoring its growth.
After few years of growth Management of Jai Shree Tea decided to expand themselves by
entering into Sugar industry.
Tea itself was cyclic business and then again they decided to enter another cyclic business
which from no angle connects to Tea Industry.
From this he realized management has lost its focus, therefore he sold his stocks.
Finally sell if valuations are just too good to digest.
As example he told that he bought Atul Auto when it was trading at PE of 5 but then sold
it when PE became 40.
Now I know many of you might be thinking he uses PE as value of measurement, well answer
is yes but by no means he is suggesting to buy stocks with low PE.
Keep in mind his other investments like Vaibhav Global and Aries Agro Products were above
PE of 30 when he bought them.
PE do can act as value for measurement but before you use it, be very sure what it really
measures with respect to business in question.
Finally lets take a look on Vijay Kedia's outlook on investor psychology.
Now as per him Market is Place for Regret.
It doesn't matter either you book profit or loss you may end up in regret and he explains
it in very interesting manner.
Suppose you invested your money in stocks, after some time you end up making good profit,
now stock matches your selling rule therefore you release your position and then prices
start rising up.
You'll regret that you ended up selling too soon.
In condition two prices match your selling rule and you end up selling your positions.
This time rather than rising, prices end up falling.
This time you regret with excuse only if I would be able to sell right at top.
In condition 3 you and your friend invested in stock together.
After a year you both book good profit on your investments but your friend ends up with
more profit than you.
You regret with excuse you made wrong analysis.
In general when you make losses you regret, you make profit you regret, you end up selling
soon you regret and someone else ends up with more profit, you still regret.
In this mentality of regret you can end up making silly mistakes later which may ruin
your investments.
The Game Of Regrets usually ends up making you blind to unpredictable nature of market.
Reality is that you can not control nature of market.
But when market starts delivering profits 50% of your profit is determined by market
with its upside, rest 50% of profit is determined by you, either you book it or not is totally
your choice.
The upside of stock is not under your control is very much evidence of the fact, you simply
can not come up with any selling rule that can help you book profits right at the top.
In some number of cases your selling rules are supposed to fail.
But for time it keeps you in profit on majority of your investments do not question its validity
with your Games Of Regret.
Throw away your regrets about your profit and losses in gutter.
As an investor you should not be playing that game.
Now lets try to understand why Vijay Kedia's investing method works.
So lets take a look on some of his investments.
First TCPL Pack on this stock he made like 10x gains.
Next Aries Agro, this was bought very recently.
Gains are yet to come.
Next Sudharshan Chemicals, here again he made like 4x gains.
Finally Everest Industries which again was bought few months ago but is also sitting
with solid profits.
If you have learned my investing method then you would have realized that almost all stocks
that we saw right now moved up as soon as they matched 52 week high criteria with economic
trigger.
So what's really happening.
Lets start with Economic Factors, economic factors are those factors due to which our
spending habits change.
Economic Factors that helps a business earn more is known as Economic Trigger.
Economic Factors are interconnected with each other which means, beginning of one economic
factor can not only trigger another economic factor but can also kill the previous economic
factor.
For example, lets consider country ABC is planning for a very big project in heavy engineering
works.
Now for completing this heavy engineering works ABC will ask for help to other countries.
Now India is one of the dominant and one of the most trusted player when it comes to completing
international level heavy engineering works.
Without any second thought India will for sure participate in ABC's project.
Since project is big, the businesses that will participate in ABC's project will need
extra man power.
Which will lead to increase in employment specially in Civil, Mechanical, Electronics,
Power, Instrumentation and Structural Engineering.
Again there will be demand for Labor Supervision.
Apart from that it'll also trigger sells in Industrial Instrument and Commercial Vehicle
sectors.
So the economic factor of ABC's project work triggered economic factors of sales in Industrial
Instrument and Heavy Commercial Vehicles along with jobs in engineering and labor supervision.
Now all these economic factors in their different stages will also trigger other economic factors.
For example, employment usually will lead to increase in insurance sales.
Again due to employment people might start buying products and services on finance.
So it can also lead to increase in sales of loans.
In general we can say economic factors are usually interconnected with each other.
The economic factor which usually leads to increase in earning power of business is known
as Economic Trigger.
Since economic triggers leads to increase in earning power of business the result is
usually formation of a new 52 week high.
The difference between how I invest and how Vijay Kedia invests is that I invest at the
end of chain when due to economic trigger prices generate 52 week high.
Whereas Vijay Kedia invests a lot before chain results in economic trigger.
Which results in we both investing in almost similar conditions with Vijay Kedia's preference
more on low risk value of stock whereas my preference set on direction of price.
Due to which most likely majority of his stocks by default are highly susceptible to be in
my portfolio too.
But he'll always have advantage of getting stock for better price.
To great extent I believe on quantitative analysis front, we must be looking at same
things, which includes consistent performance in spite of bad economic conditions.
And since result of economic trigger is usually more earnings cash flow before economic trigger
isn't really important because economic trigger will automatically result in increase of positive
cash flow.
Now important question is if I know Vijay Kedia catches stock at the beginning of chain
then why I don't catch chain myself.
Well the answer is chain analysis is not really as easy as explained in diagram.
The beginning of chain usually leads to settling down of price volatility but it is still hard
to figure out where chain begins and how it will react later.
Identifying trigger phase is easy because it results in a new 52 week high.
Now since price is at 52 week high my risk increases, so to make consistent profits I
depend more on better risk management and strategy than method of analysis that can
provide me buy position at lower price.
Again I am a Techno Fundamental Investor and to invest I do believe in golden rule of techno
fundamental investing, which states, "Technical Always Follow Fundamentals".
So if fundamentals are strong there is extremely high chance it'll also become visible on price
chart.
And all buying positions are very much likely to be similar.
So here's TCPL Pack, this is 52 week high generated because of Economic Trigger and
here is chart setup that shows it.
First we get a Standard Bullish cross and then there was long term resistance break.
Technical and fundamental match so its a valid buy position.
Aries Agro again Standard Bullish cross along with long term resistance break.
Sudarshan Chemicals, again a Standard Bullish cross along with long term resistance break.
You ain't really going to see anything different on Everest Industries, Apcotex Industry or
any other stock in which upside is triggered with economic trigger.
After fundamentals get strong it is highly likely that they'll appear on chart.
Where you buy, how you manage risk and how you apply strategy finally turns profit for
your portfolio.
While Vijay Kedia prefers concentrated portfolio, I prefer over diversified basket approach.
So before we end this video a final word of wisdom, your success as investor is not decided
by superiority of your analysis method.
It is decided by how well you can implement whatever skills you have to get better results.
With that said thanks for watching this video and have a nice day.
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