My Coffee Can Portfolio

What I own and how I think about it

In this post, I am going to share my own Coffee Can Portfolio (CCP). This is not a solicitation for you to buy those securities, but to share how I think about constructing a coffee can portfolio, so you can use that to construct your own portfolio. You are obviously free to use these tickers, though you will be hugely disappointed to know that there is nothing path breaking here.

Methodology

I want to share how I arrived at this CCP when I set this up 2 years ago. As mentioned in a previous post, I started CCP in order to set up a long term investment plan for my pension funds. Given the long horizon, it seemed to naturally fit the constraints of coffee can investing. 

I started by thinking about the geographic spread. Here was my thinking:

Once I had this allocation, I decided to split them across 50 tickers. So, the US would have needed about 18 tickers and so on. In each market I looked for companies that have been (a) profitable for long periods of time and (b) paying out dividends for long periods of time. As mentioned in my previous post, I don’t necessarily need the companies I invest in to be dividend paying, but it is a pretty strong signal that the company has a sound record of profit generation and return of capital to shareholders.

Once I had this allocation, I searched for “Top dividend paying companies in <market-x>” and “companies with best track record in <market-y>” and variations of this to end up on various blogs, posts, articles listing possible companies. This helped me form a superset of companies I want to be invested in.

Within each market I looked through the companies to identify what I thought was an internal ranking - some companies naturally seem to be better to own than others. For instance, if all you want is the highest dividend yield, you will end up with a bunch of utility companies, but those companies don’t grow either the business or the dividends in a big way. So you want to look for companies that may pay a lower dividend yield today but have a business big enough to grow them with time, and having the track record of having done that in the past is a big plus. 

Once I had this list, I inverted (as Charlie often suggests we do). I looked at companies that didn’t make the cut due to this approach, but are really admirable companies worth owning. The obvious example here is Berkshire Hathaway - a superbly run company with a sound record of generating profits and re-investing them, with structural benefits (such as the insurance based leverage) that won’t make it to this list because of the dividend filter. So, I conducted a second iteration of the companies list, and yes Berkshire made it this time! :) 

Once this was done, I did a sanity test on all of them - spend half an hour to an hour reading about each company - if there are any known skeletons. You don’t need to be Hindenburg Research to get some basic feel about a company. A few companies didn’t make the cut after this filter.

Actual List

Since Substack doesn’t allow me to add tables, you can find the list here.

Caveats

This is my core Coffee Can Portfolio, but I also own a bunch of stocks that aren’t in this list, but I still hold under my coffee can investing style. I call that my Extended Coffee Can Portfolio, or ECCP in short. ECCP is nothing more than a collection of funds, and a motley selection of stocks I initiated investments over the years that for whatever reason made it to the grade of “I am not selling this anytime soon” and hence made it to *a* list, not *the* list. I will largely focus my writings on this substack on the tickers in the core CCP mentioned here, but will from time to time deviate to give readers a flavour of things beyond what’s here.

Areas of Improvement

While I have enough conviction to invest large portion of my family’s net wealth in this coffee can portfolio, I am aware of some shortcomings:

• Banking, Energy sectors almost doesn’t exist - this seems like a glaring hole in the portfolio as both are structurally set up for successes in the high-interest, high-energy cycle we are likely to endure for the next few years.

• The label “Consumer” is applied to 14 companies in the list - and perhaps there are too many. To be honest, this categorisation is entirely mine and is mostly arbitrary - I don’t see Roche behaving anything similar to Costco, but are both categorised similarly. However, between Unilever, P&G, Roche, Nestle, Mondelez and Pepsi, there are too many companies of a very similar ilk there.

• Big-Tech has only 3 tickers, though Apple is amply represented through the Berkshire holding. All 3 of them are going to be structurally challenged in the coming years, both due to their size and regulatory activity. I often wonder if both tech is underrepresented, or if represented amply, then are these the best companies I can select.

• There is nothing exciting in here - I don’t want to add something exciting for the sake of exciting, but truly, I don’t see anything that stands out as bets to be 100X in the next decade or so. Most of these seem to be boring mature-stage companies. The risk here is obvious - most portfolio have, say 10% of their companies being big winners contributing 80% of the upside. Can I spot which of these are going to do that? Not really. Does that bother me much? Not really, but worth mentioning. 

• There is only China and India listed outside of the developed economies. There is obviously substantial economic opportunity that lies outside of my portfolio that isn’t represented here.

I mention these areas of improvements as a trigger to force you to think about how you can construct a portfolio that can likely overcome some of these, or perhaps you don’t, but you go in with your eyes open too, as I do.

(Do you see more areas of improvement? add a comment)

Post-Construction

I have to admit that tracking these many positions is hard for most of us on a day to day basis. The intention of Coffee Can Investing however is to remove day to day tracking and to defer them as far away as possible.

My only operations on my Coffee Can Portfolio are:

Once a month, see if I have any money to invest. Add up any dividends received and I have an investable amount. See which of the positions are under-represented compared to where I would like them to be, or pick the investments not touched for the longest, or the ones that have fallen the most. Take a few minutes to decide how to split my money and then just press BUY on the right amounts. Takes a total of an hour.

Once every few months (generally 3 months or so), see if any annual reports¹ have dropped. If so, see if something major has changed in the business. If nothing substantial, do nothing. if something really really bad has happened (not just one bad quarter or so), put it on an orange list to not buy till things get better. Most companies’ results can be skimmed through in a few minutes. The stuff that takes time comes few and far apart and might take an hour or two. I believe in about 2-6 hours each quarter, you can cover all the news on this front. 

About 5-10 hours a quarter. That’s not too bad, is it?

In fact, a large part of my effort at writing this particular substack is to provide my readers as much input on the “Once a month” and “Once every few months” categories, so that fewer readers would have to do this themselves, but Do Your Own Due Diligence (DYODD).

From my next post onwards, I will be doing deep dives on the tickers from this CCP.

Disclaimer: I hold positions in all the tickers mentioned in this post. I am not your financial advisor and bear no fiduciary responsibility. This post is only for educational and entertainment purposes.

1. I don’t read quarterly reports. Since my time horizons are much longer, I only look for annual reports. This means I am generally looking to read about 50 documents a year. Annual reports are spread through out the year, but more than half the companies end their year on Dec 31, which means Feb-May is peak reading time. Given the long term outlook, I don’t feel the need to read an annual report as soon as it comes. I have a backlog of reports waiting to be read at any time.