Robert Kirby's original 1984 article on "The Coffee Can Portfolio", recently popularized in @chriswmayer's amazing book "100 Baggers".
@dmuthuk @Gautam__Baid @iancassel @IntrinsicInv
@GavinSBaker @saxena_puru
Few of my takeaways in the thread below.
csinvesting.org/wp-content/upl…
@dmuthuk @Gautam__Baid @iancassel @IntrinsicInv
@GavinSBaker @saxena_puru
Few of my takeaways in the thread below.
csinvesting.org/wp-content/upl…
The article only briefly introduces the concept - buying great companies and leaving them alone for a very long time, while mostly arguing about the Passive vs Active approach (I can't believe this discussion is still ongoing after 35 years).
Few of my favorite points. 👇
Few of my favorite points. 👇
This can be a great approach for certain type of investor, or certain part of their Portfolios (focused on LT growth).
"The success of the Coffee Can program depends entirely on the wisdom and foresight used to select the objects to be placed in the coffee can to begin with."
"The success of the Coffee Can program depends entirely on the wisdom and foresight used to select the objects to be placed in the coffee can to begin with."
In a world of ever increasing rate of innovation & disruption (affecting all sectors) & also abundant information/noise in the Market, You'll need a certain type of mindset and also certain type of Companies to make the most out of this Coffee-can approach.
Few I could think of.
Few I could think of.
1) Having their Quality filter really high, and clearly understanding what makes a particular businesses successful - Leveraging trends (or great at adapting to them), Mgmt with great vision/execution/Capital allocation skills, Moat which is getting wider..
long runway for incrementally high ROIC generation, Excellent financials offering lot of flexibility/optionality...
2) Gives enough importance to Valuations on why their purchase at this price would give them good returns - Company severely undervalued based on their long-term
2) Gives enough importance to Valuations on why their purchase at this price would give them good returns - Company severely undervalued based on their long-term
earnings potential, or Company with decent Rev/earnings growth combined with dividend stability etc.
3) Understands that creation of Business value takes time (and that they don't strictly follow Qtrly/Yrly timelines) and that Stock prices will eventually
3) Understands that creation of Business value takes time (and that they don't strictly follow Qtrly/Yrly timelines) and that Stock prices will eventually
follow business value (with periods of over & undervaluation along the way).
4) Identifies the few criteria that really matters for that particular business/industry and only reacts when those metrics are materially changing (for the worse).
4) Identifies the few criteria that really matters for that particular business/industry and only reacts when those metrics are materially changing (for the worse).
5) Practicing Patience, Discipline, ignoring market noise, learning to deal with Volatility and having conviction in your thesis when facts are aligned etc.
6) Holding them for a very long time (while keeping in mind all of the above).
6) Holding them for a very long time (while keeping in mind all of the above).
Overall a very useful mindset for younger/individual investors, with long horizons, who don't shy away from the initial effort picking the right type of Co's, does the maintenance due-diligence as required, ignoring the other noise, and not disturb magic of compounding. 👍
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