Good Investing is more than the constant culture of buying and selling of shares in stock market. Many mighty investors have contributed for “Buy and hold” strategy and long term holding of shares, one among them is Robkirby coffee can investing.
Coffee can investing strategy came into birth when the wife of his deceased client seeking Robkriby’s help in handling her portfolio. This Client’s husband bought the shares based on the buy signal of Rob kirby, but never sold his holdings when Rob kirby made a sell signal. The husband sit tight on his investments for decades.
Buying and holding a stock for more than a decade or long, could be a nightmare for many investors.
Some claim themselves as long term investor by holding shares for three to six months. Seriously it has become long term investing! Let’s not get into it!
That’s a different story altogether!
In this article , we will see how well Robkirby coffee can investing strategy performed in real world market.
Time duration
Beginning: March 31st 2010
Finishing: March 31st 2020.
First of all, Let us pick a handful of companies and add in to our portfolio , wait for 10 years to see what “Coffee can investing strategy” magic spell had done to our portfolio.
Image source: Changyoung Koh on Unsplash
I am writing these article by adhering to below points.
The strategy we follow is by selecting 10 stock for investment, divide our investment capital in ten equal halves and invest them in to our portfolio which we created for coffee can investing .
All the ten shares should be in your circle of competence, near zero debt. That is the minimum requirement I hold while selecting companies to invest.
I have also selected stocks from different sectors, who were in the industry or industry leader and listed in the stock market for more than ten years. Also I have completely avoided the PSU sector shares or government owned firms. ( I hold stock aversion towards PSU, most are slow to grow).
I have covered the details such as why I have selected the stock, its products and segments, whether the company has pricing power or not, profitability suspectable to raw material rise and demand, whether they operate in B2B space (business to business) or B2C space (business to consumer) , etc.
As I am writing this post, I feel its going to be a long one. So bear with me as you continue to read!
Coffee can investing strategy – Experiment begins!
Please assume as I bought these shares on 31st March, 2010 and selling or reconstructing the portfolio on 31st March, 2020. (Remember market impacted by COVID 19 )
I listed down the companies which had been bought based on the criteria mentioned below:
Government or PSU companies –
Most of the companies operates by government are utility, oil and mining companies. It needs a lot of capital to operate and grows at very slow pace or nil. Hence I stay away from investing in those companies.
Pricing power:
Companies should be able to rise the price of a product and pass it on to its consumers/ clients. Eg: In the case of raw material price increase (eg: Coconut, chemicals) hence, it can maintain its profit margin. Mostly their products should have become part of consumers life or habit. In other words, it should be a household brand.
Business to Business:
Usually I stay away from the companies operates in B2B space. Why?
Suppose you are a toy supplier to Walmart. Imagine who dictates the price of your product? Walmart or supplier (You)
Usually Walmart wins in negotiation war. At a rare scenario, a supplier can command premium price from their customers due to great demand of their toys, or they operate in very niche technology where others suppliers can’t do it. (superior technology, eco friendly material, etc.) Such companies are 1 in 100 at Business to business space.
Also If Walmart decides to terminate your contract for whatsoever reason, you will lose a chunk of revenue (based on your business dependency on Walmart)
Business to consumer:
I have a question for you? When was the last time you negotiated in Nike showroom or GAP?
Your answer will tell, why I prefer business to consumer sector over business to business.
Due to pricing power, inflation can’t eat away their margins, From investors point of view, consuming these products gives me confident to invest.
Selected companies:
Results:
Note: Asian paints caters its services to Auto manufactures (B2B) and residential houses (B2C).
Lets see how much 100000 INR would have generated by investing 10000 in each of these scripts.
Final Results
100000 investment generated 749896 INR. That is close 650 percent return in 10 years. Robkirby coffee can investing strategy performs like a magic.
Also remember , these return are not inclusive of dividends, splits, bonus, etc given by the company in that 10 year tenure.
Since market was impacted by COVID at the year of 2020, the returns were 15 to 20 percent less. In a normal scenario, it should be more than 650% return.
I prefer to stay away from auto companies, real estate companies , because I fundamentally believe its easily to sell a 100 Rs Razor blade than selling a 1000000 Rs car.
Also the audience of buying a car is far more small, but the audience for buying a razor blade is hugely more. So the company can sell more, generate more ROIC than car manufacturer.
Car manufactures has to invest heavily in their plant, inventory, R&D, etc. So the capital requirement will be higher. But a blade manufactures capital requirement will be far less.
Conclusion
We need to pay exclusive attention to what kind of shares or business is going into our coffee can investing strategy portfolio.
If we select it right, Most of the work is done! Just sit tight on it for a decade.
If you want to know about financial metric of coffee can investing. Please read the below article.
Related: Magic of coffee can investing
Thank you for reading. Happy coffee can investing!
