This is a new book published by Penguin books in 2018. I just completed reading this book and found it very apt for common people to grow the wealth taking lowest risk. This book is completely in Indian Stock market context. The term Coffee Can investing was coined by Robert Kerby, who was a portfolio manager at Capital Group, one of the major investment management firms, in the 1980s. He came up with the coffee can idea as a coffee can was used to store valuable items in the olden days. Saurabh Mukherjea, the author of this book and ex-Ceo of Ambit Capital had written 2 other books as a pretext to this idea named “Gurus of Chaos” and “The unusual Billionaires” which were also extremely thought provoking books on investing.
This book has 8 chapters and 5 Appendix references in all. I would recommend reading through all chapters including appendix materials to get thorough understanding of the concept of Coffee Can investing, power of equity growth to create stupendous wealth over physical assets like real estates and Gold. He substantiates the hypothesis with couple of example life characters and how to solve their financial problems through meticulous financial planning and capital allocation.
I learnt the following key things as a takeaway:
- The importance of growth plus return on capital of companies can be achieved only through great businesses with focused and quality management
- Chapter 2, 5 and 6 are must read for understanding the construct of quality businesses portfolio, power of compounding, how small companies can compound faster due to the size and the importance of patience in investing to create long term wealth
- Return of Indian retail investors to stock markets especially through mutual funds is definitely assuring about the long term investing prospects in India. There are lot of data were provided to prove the thesis right through the book
- The best chapter I liked is chapter 6 that talks about patience and quality intertwining. Especially about the myopic loss aversion and Richard Thaler`s paper. The book clearly shows what patience premium is and what quality premium is. Something I learnt about how patience and quality premium supersedes normal index returns.
- There is detailed analysis of each coffee can portfolio that harkens back to 1991 start period all the way till 2017 in Appendix. Another interesting lesson for me was Appendix 2 which talks about the PE ratio myths that justifies the valuation arguments by everyone. The chapter really substantiates well how starting or entry PE has no significant impact over long term returns.
Great book to read and understand lots of concepts put together in a simple easy read format.