COFFEE CAN PORTFOLIO- A Long-term wealth creator
The stock market has numerous techniques and methods for
investing. People do Fundamental analysis, technical analysis, a mixture of Fundamental
and technical analysis, BTST (Buy Today Sell Tomorrow), Options Strategies,
etc. It should also be noted that thousands of Companies’ shares are listed on a
stock exchange. Searching for a particular stock and analyzing it in our risk
parameter is always a hectic job. The process takes a great deal of time and
energy as well. Among the numerous techniques, the "Coffee Can
Investing" technique is more durable and provides a reasonable rate of
return over the long term. The concept was developed in the context of long-term
investment.
What is Coffee Can Investing?
It’s a technique of
"Buy and Forget." It’s a technique where you choose a particular set
of stocks to invest in and then forget about them for a long period of time. As
the investment is made for the long term, one cannot choose stocks randomly.
One should ensure that the stocks selected meet the minimum criteria set out in
this technique.
Generally, the Coffee Can Portfolio is comprised of stocks that have delivered at least 15% ROCE (Return on Capital Employed) and revenue growth of at least 10% on a yearly basis for the previous ten years.
The origin of the Coffee Can portfolio is found in the American Old
West. People used to place their valuables in a coffee can to keep them safe. The
coffee can was subsequently stowed away under their mattress, where it remained
for years and decades. Investing in these types of stocks has given a return higher
than the industry benchmark say, Sensex or Nifty50 by 5%-15%.
It's also worth noting that prior success is only a guide and no
assurance that the same outcome will be achieved in future years. Because the
investment is for a longer length of time, ten years, it is also necessary to
consider macroeconomic changes in the coming years. Because technology is
constantly becoming obsolete, investors should try to incorporate stocks of
companies that are attempting to adapt to changing economic and technological
situations.
Many mutual fund managers enjoy investing at least a portion of their AUM
in these kinds of shares.
The following is a sample list of stocks that provided consistent returns and met the Coffee Can Portfolio's requirements.
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CA Sanjay R Shetty
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