Saurabh Mukherjea of Ambit Capital is well known for his Coffee Can portfolios.
The “Coffee Can” portfolio is a portfolio is a portfolio of stocks that you buy and keep for ten years.
In his book, The Unusual Billionaires, he expands on this concept in detail.
Stocks that make it to the Coffee Can portfolio have to meet only 2 criteria for every year in the last 10 years:
1.Revenue Growth > 10%
2. ROCE > 15%
Using examples and detailed case studies of 7 companies (Asian Paints,Berger Paints,Marico,Page Industries,Astral Poly,HDFC Bank,Axis Bank) , he makes a persuasive case why such a portfolio will work in the Indian context.
There is also a checklist to evaluate a business.
One flaw in the book I found was the author paid no attention to price.A business may be great but does it make sense to buy it at nose-bleed valuations?
There is one particular excerpt in the book which I found particularly interesting:
“While there are other successful modes of investing in the equity market,their ability to deliver sustained outperformance over long periods of time (say 3 years or more) is unproven in the Indian context.
In more mature markets,which have much greater liquidity and greater transparency,short-term trading have been practiced over long periods of time by legendary investors such as George Soros,Juilan Robertson and Michael Steinhardt.
However,given that India is the least liquid amongst the world’s fifteen largest equity markets,the only viable option open to those who want to deploy large sums of capital successfully is long term investing.”
A worthwhile read for those interested in the Indian Equity Markets.