Why is Vijay Kedia backing ‘Tortoise Stocks’ in a volatile market?

Synopsis: In a market where high-growth stocks are increasingly risky, Vijay Kedia is turning to steady, well-managed companies for long-term gains. His approach highlights patience and fundamentals over quick profits, suggesting a shift in strategy that could shape future investment choices.

In an era where flashy, high-growth stocks often grab headlines, seasoned investor Vijay Kedia is turning attention back to a more disciplined approach. Favoring what he calls “tortoise stocks,” Kedia emphasizes companies that grow steadily over time, with strong fundamentals and consistent performance, rather than chasing quick, unpredictable gains. In a market marked by volatility and uncertainty, this slow-and-steady strategy is increasingly gaining traction as a reliable path to long-term wealth creation.

Who is Vijay Kedia?

Vijay Kedia is a well-known Indian investor who has been investing in the stock market for many years. He looks for companies that are strong, well-managed, and likely to grow steadily over time. Kedia believes in being patient and focusing on long-term gains rather than quick profits, which has made him one of India’s most respected investors.

SMILE Strategy?

Vijay Kedia’s SMILE strategy is an investment philosophy focused on identifying small-cap and mid-cap companies with high growth potential. SMILE stands for Small in size (small companies), Medium in experience (management with moderate experience), Large in aspirations (companies with big ambitions), and Extra-large in market potential (operating in sectors with significant future opportunities). This approach helps investors spot undervalued stocks that can become multibaggers over time. By investing in such companies, Kedia aims to find businesses that can grow steadily over time and give high returns in the long run.

Reason why Vijay kedia is not choosing SMILE strategy

Ace investor Vijay Kedia warns that the small-cap and mid-cap segments of the market have become overheated. Many stocks have already multiplied several times, reducing future upside while increasing the risk of sharp declines. Chasing multibaggers now could backfire, creating what Kedia calls “reverse multibaggers”; stocks that could lose a significant portion of their value.

Kedia uses a simple analogy to explain his strategy. Cheetah stocks are fast, high-growth, and high-risk, built for short bursts but vulnerable to volatility. Tortoise stocks, on the other hand, are slow, steady, and resilient, designed to withstand market swings. In the current environment, Kedia believes that tortoise stocks are safer and potentially more rewarding over the long term.

Small- and mid-cap stocks have enjoyed extraordinary rallies in recent years. While earnings growth may continue, valuations have already risen sharply, leaving little margin of safety. Without attractive entry points, these high-flying stocks are exposed to major corrections, making the chase for multibaggers extremely risky in today’s market.

Tortoise stocks are established, resilient companies with strong fundamentals. Key characteristics include reasonable valuations, solid balance sheets with low debt and healthy cash flows, and a consistent history of dividend payouts. While they may not provide explosive returns in the short term, they protect investors’ capital and compound wealth steadily over time.

Kedia highlights Public Sector Undertaking (PSU) banks as prime examples of tortoise stocks. After years of consolidation and balance sheet cleanup, many PSU banks now exhibit strong financial health, improved asset quality, and attractive valuations. Linked closely to India’s economic growth, these banks are poised to benefit as credit demand rises, offering both safety and credible growth potential.

Creating a tortoise portfolio requires focusing on timeless investment principles rather than chasing tips. Investors should prioritize companies with reasonable valuations, strong balance sheets, and consistent dividend payouts. Annual rebalancing ensures the portfolio maintains its risk profile, trimming overvalued winners and adding undervalued opportunities. The goal is steady wealth creation while preserving capital.

Kedia emphasizes that this strategy is cyclical. Markets move in cycles of greed and fear. By investing in tortoise stocks today, investors protect their capital and build a stable base. When valuations in small- and mid-cap stocks fall after a correction, they can shift some capital back into carefully selected cheetah stocks, ready to hunt for the next generation of multibaggers from a position of strength.

Conclusion

Vijay Kedia is focusing on “tortoise stocks” because fast-growing small- and mid-cap stocks are now risky and expensive. By investing in strong, stable companies with steady growth and good financial health, he aims to protect money while still earning solid long-term returns. This slow-and-steady approach shows that being patient and picking quality companies can often beat chasing risky, high-flying stocks. Later, when the market is favorable, investors can shift back to high-growth opportunities.

Written by Akshay Sanghavi

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