Vijay Kedia's textbook advice to spot 'Multibagger' stocks, the SMILE acronym – Ace investor’s investing mantra

Ace investor Vijay Kedia has distilled his decades of market experience into a simple formula he says can help investors identify future multibaggers. His approach revolves around one acronym, 'SMILE'. “I simply apply one formula. The acronym is called SMILE,” he explained, breaking it down as “small in size, medium in experience, large in aspiration, and extra‑large in market potential.”

Speaking to ET Now, he said, "I like to invest in a company which is the smallest, or maybe a small company in its sector. Obviously, I do invest in small-cap and mid-cap companies only."

He further added that MI stands for medium in experience, the management should have medium experience, say 15–20 years plus in the industry, a clean track record, people who have seen market cycles, good and bad times. "L stands for large in aspiration. The promoters or the management should have large aspirations, they should be ambitious, they should have big dreams, they want to grow the company significantly, not just run a small family business," he said

And E stands for extra-large in market potential; the industry or the sector should have an extra-large market opportunity, huge untapped demand, a sunrise sector, or a sector with a very large runway for growth in India, Kedia noted.

"So usually, when I find a company that fits into this SMILE framework, small in size, medium in experience, large in aspiration, extra-large market, I like to invest and hold it for the long term, 10–15 years or more," he said.

Kedia further explained that if you have patience and the story remains intact, you cannot go wrong. "Many of my investments have become multibaggers because of this simple approach," he said.

His advice surrounds cutting the noise, staying patient, backing good management in large opportunity areas when the company is still small, and letting time and compounding do the work.

(Disclaimer: The above article is meant for informational purposes only, and should not be considered as any investment advice. ET NOW DIGITAL suggests its readers/audience to consult their financial advisors before making any money-related decisions.)