Vijay Kedia bullish on capex theme, says his smallcap stock bet jumps 3-4 times in 2 years

As smallcap and midcap indices are flirting with record high levels, seasoned investor Vijay Kedia says he is happy with stocks he is invested in, adding that some of his smallcap picks have risen 4-5 times in the last two years.

Kedia, who believes one should stay in sunrise industry at any cost, said he is bullish on the emerging capex and defence themes. His investing mantra: Buy companies which are coming out of crisis and are cheaply valued.

The ace investor, who owns stocks such as Patel Engineering and Elecon Engineering, said it is a beginning of capex and infra cycle and that he his holding in Elecon Engineering has already delivered him 3-4 times returns since he bought it two years ago.

"The story is just intact. Whatever capex we saw in India so far was done by the government. The private capex is yet to catch up. I was listening to one of the interviews of the RBI governor where he said the capacity utlisation in the private sector is 73-74 per cent. But CII has a different opinion. Off the record, they said it might have reached 80 per cent level. I believe we should get 3-4 years of straight runaway in this sector," Kedia told Udayan Mukherjee, the Global Business Editor at India Today Group.

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The seasoned investor said he prefers stocks with reasonable valuations. He said he finds capital goods stocks expensive. Kedia was quick to point out that he bought Elecon Engineering when it was available at reasonable valuations vis-a-vis other stocks in the sector.

Elecon Engineering, he noted, was selling its products to steel, cement, power, telecom and even defence segment. Patel Engineering, he recalled, too was available at throwaway price. "But the stock price has doubled and, so, this is not at all recommendation. I look at companies which are coming out of crisis, which are cheaply available," he said.                 

Defence is another sector that is gaining traction and Kedia admits that valuations in the space are getting richer day by day. Kedia said when a sector is about to turn around, one gets cheap valuations. "But as soon as the story is in public domain, one sees valuations getting expensive. Same applies to defence," Kedia said while expecting defence stocks to keep on commanding expensive valuations.

"I don't see they would fall or get any cheaper. You have to foresee the future and do a future discounting only. Kedia said he had bought shares of Hindustan Aeronautics two years ago, but exited early "unfortunately".

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