Book Review : Coffee Can Portfolio – Investing

Saurabh Mukherjea is back with another book called Coffee Can Investing. But first, what is Coffee Can Portfolio?

In a paper in 1984, Robert Kirby of Kirby Capital had described an event involving his client’s husband who had bought stocks advised by Robert Kirby at $5,000 each. He did not ever sell anything from it. In addition, he put the certificates in a coffee can. (In the 1900s, Americans used to save their valuables and cash in a coffee can (tin).) After 10 years or so, these turned out to be enormous money. One of the holdings was Xerox co. which was zoomed to $800,000+ in value. In describing this result of ‘buy and forget’ strategy, Robert Kirby found the term Coffee Can Portfolio. Another, study by Fidelity showed that there were 2 types of people who create the maximum wealth—those who were dead and those who had forgotten about their investments.

How many books can you get, out of a simple two quantitative filter, of 34-year, called the ‘Coffee Can Portfolio’ (CCP)? 2 years ago, Saurabh Mukherjea, CEO of institutional equities, Ambit Capital, came out with Unusual Billionaires, a 445- page book that was essentially the story of 7 of the 8 companies that met the Coffee Can Portfolio requirements.

So, question is here, Can one create such buy & forget portfolio now?

Here are the filters:

  1. Select companies with, at least, Rs. 100 crore of market-cap
  2. Filter out those which have been around for 10 years.
  3. Select companies with at least 10% revenue growth
  4. 15% return on capital employed (RoCE) for each one of the past 10 years.
  5. For financial firms like Bank, use return on equity (RoE) of 15%
  6. Loan growth of 15% every year.

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Imagine, these few simple steps have yielded at least two books already. In Unusual Billionaires, 8 companies managed to fulfill both, the growth and return criteria, in each of the past 10 years while the list has gone up to 12 companies in Coffee Can Investing book.

The first book is about 7 stories of the 8 Coffee Can Portfolio stocks and was called Unusual Billionaires. The second book is called Coffee Can Investing but Coffee Can Portfolio is only a part of it. The book is an request to retail investors to plan their finances by avoiding insurance, gold, real estate and fixed-income products for money making. Coffee Can Portfolio is advised to be a small part of the financial plan which should be made up of Nifty ETF (exchange traded fund) and mid-cap mutual fund schemes.

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