Vijay Kedia: No ishq (love), only risk in buying stocks like Tesla, says Vijay Kedia
Risk hai to ishq hai‘ from the web series
Scam 1992, based on the life of tainted stockbroker Harshad Mehta, has ended up as the rallying cry of Robinhood investors, who are in a rat race to earn their first crore almost overnight on Dalal Street.
Some of these investors are even betting heavily on Tesla, a five-bagger of last 12 months. After hitting a 52-week high of $900 earlier this year, the stock has disappointed Elon Musk’s fans with nominal returns on a year-to-date basis.
“I have ‘
ishq’ with risk, but I won’t buy a stock like Tesla because in this case there is no ‘
ishq’, but only risk,” says Vijay Kedia, one of India’s most popular value investors, who has a knack for spotting multibaggers at a fairly early stage.
Explaining his rationale, Kedia said the stock valuation is what makes it risky. “I don’t want an adventure like that. The stock market is already running at a break-neck speed of 500-600 km per hour, and one should not take extra risk in a business like this. If you are riding a Lamborighini at a high speed, you need not be extra-adventurous with speed and take unnecessary risks like not using the seat belt,” the Mumbai-based investor told ETMarkets in an interview.
Among the Indian investors buying US stocks, Tesla is one of the most sought after ones. After skyrocketing 695 per cent in 2020, Tesla stock is projected to hit $3,000 by 2025, up almost 4 times from its current price, says Cathie Wood’s Ark Invest Management.
Kedia’s advice to Indian investors is to have a margin of safety while buying any stock. “The biggest margin of safety is in the price. That is what would balance your risk. Don’t buy any share that is in an euphoric state,” he said, adding that one can find a number of shares in the Indian market that can deliver better returns than Tesla.
At the ETMarkets Global Summit earlier in the year, market guru Raamdeo Agrawal had expressed a similar view on Tesla’s valuation. “Today there is euphoria. Clearly, it is riding on too much optimism. In calculating valuations, you are not discounting what the company has earned in the last five years, but discounting what it may earn in next 25 years. This is bizarre,” said the Chairman and Co-founder of Motilal Oswal Financial Services.
Not just Tesla, Kedia refuses to buy any stock, irrespective of its growth potential, if it is an euphoric state. “My principle is to look for stocks that are available at cheaper valuations, have a good growth outlook and are not in an euphoric state. If you have the patience to hold a stock long enough, then small mistakes will get ironed out,” he says.
Kedia’s recent multibagger picks included Neuland Laboratories, Ramco Systems, Vaibhav Global, Tejas Networks and Affordable Robotic.
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