Last Updated on Nov 28, 2023 by Harshit Singh
Investing in stocks can be approached in various ways. Some follow personal strategies, while some replicate a proven strategy like coffee can investing method. Amid market volatility, the ‘Coffee Can Investing’ method stands out as a proven, low-risk approach. Widely embraced for decades, it involves building portfolios of “coffee can stocks” with a focus on stability, offering a reliable avenue for Indian investors seeking high returns.
In this blog, we will delve deeper into understanding the meaning of coffee can investing, while indulging in identifying coffee can stocks using the coffee can formula to build a coffee can investing portfolio.
Table of Contents
Meaning – Coffee can investing
Coffee Can Investing is a long-term investment strategy involving screening and holding onto high-quality stocks for an extended period, typically for several years or even decades.
It is similar to what our grandmother/mother has been doing for decades – using a “can” as a piggy bank to save money. The only difference between ‘Coffee Can Investing’ and ‘Piggybank Investing’ is that your savings don’t erode with inflation or time, nor will it create any significant return.
With the coffee can investing formula, you can create a diverse investment portfolio to create significant returns to achieve your long-term financial goals.
Benefits of coffee can investing portfolio
Investing in stocks can be a tricky business, but it doesn’t have to be. A coffee can portfolio is a calculated way to create a well-rounded portfolio. Here are six benefits of creating a coffee can portfolio:
Reduced trading costs: Since coffee can investing involves holding onto stocks for an extended period, there is less need for frequent trading. Thus reducing trading costs such as brokerage fees, commissions, and taxes.
Tax benefits: Long-term investments held for more than a year are taxed lower than short-term investments. This means that a coffee can portfolio can result in lower tax liabilities for investors.
Reduced market volatility: Investors can avoid short-term market volatility by holding onto stocks for a long time.
Increased returns: Historically, the stock market has provided higher returns than other investment options like real estate or fixed deposits. By holding onto stocks for a long time, investors can make higher returns on their investments.
Better capital appreciation: In a coffee can portfolio, stocks are not sold for long, allowing them to grow and appreciate in value.
Simplified investing: With a coffee can portfolio, investors don’t need to worry about timing the market or constantly monitoring their investments. It makes investing simple and less stressful, allowing investors to focus on other important aspects of their lives.
Overall, a coffee can portfolio can effectively build wealth over time and achieve financial security.
Create a coffee can portfolio in 5 steps
The premise of coffee can investing is to build a stock portfolio of fundamentally strong companies that showcased growth consistently over the years.
To brew yourself a perfect investment portfolio of high-performance stocks, follow these five easy steps –
Step – 1
Identify companies that are market leaders and have existed for at least 10 yrs.
Step – 2
Open Tickertape Stock Screener and set the ‘Market Cap’ to Mid Cap/Large Cap.
You can filter out companies according to their industries by clicking on ‘Sector.’
Step – 3
Add ROCE filter and set the markup above 20%
Return on Capital Employed (ROCE) is calculated by deducting total current liability from total assets. A higher ROCE indicates that the company has invested a considerable chunk of profit back into the company for the benefit of its shareholders.
This filter will give you a list of companies with good financial positions.
Step – 4
Step #4 – Select the ‘5Y Historical Revenue Growth’ to high.
With this filter, you will have a list of companies with high annual compounded revenue growth rates over the last 5 yrs.
Step – 5
Cherry-pick stocks from atleast five different sectors or companies to diversify your portfolio.
You can spread out your investment in various top-performing sectors to create the perfect investment portfolio. First, click on ‘Sector’ to filter out companies according to their industries. Then, select the stocks from the industries that you understand or are top performing.
List of coffee can portfolio stocks in India
| Stock Name | Sub-Sector | Market Cap (Rs. in cr.) | Close Price (Rs.) | ROCE (%) | 5Y Historical Revenue Growth (%) |
| Titan Company Ltd | Precious Metals, Jewellery & Watches | 3,01,576.52 | 3,396.95 | 34.51 | 20.33 |
| SRF Ltd | Diversified Chemicals | 69,938.47 | 2,359.40 | 21.92 | 21.24 |
| Solar Industries India Ltd | Commodity Chemicals | 61,410.17 | 6,786.40 | 36.38 | 29.25 |
| PI Industries Ltd | Diversified Chemicals | 57,115.86 | 3,765.50 | 20.33 | 23.29 |
| Astral Ltd | Building Products – Pipes | 51,944.40 | 1,933.70 | 22.06 | 20.04 |
| Persistent Systems Ltd | Software Services | 48,188.24 | 6,390.35 | 27.64 | 21.71 |
| APL Apollo Tubes Ltd | Building Products – Pipes | 47,042.24 | 1,696.25 | 25.34 | 24.86 |
| Fertilisers And Chemicals Travancore Ltd | Fertilizers & Agro Chemicals | 45,353.27 | 700.90 | 56.96 | 25.49 |
| Coforge Ltd | IT Services & Consulting | 34,615.42 | 5,618.55 | 26.55 | 21.66 |
| Coromandel International Ltd | Fertilizers & Agro Chemicals | 33,415.14 | 1,135.05 | 34.50 | 21.74 |
| Oil India Ltd | Oil & Gas – Exploration & Production | 32,412.87 | 298.90 | 21.51 | 24.10 |
| Deepak Nitrite Ltd | Commodity Chemicals | 29,941.00 | 2,195.20 | 27.05 | 36.97 |
| Indraprastha Gas Ltd | Gas Distribution | 27,440.03 | 392.00 | 25.62 | 25.46 |
| Ratnamani Metals and Tubes Ltd | Building Products – Pipes | 24,736.17 | 3,529.10 | 24.82 | 20.16 |
Note: The data is of 27th November, 2023 and the coffee can stocks are identified using the above mentioned steps –
Conclusion
In conclusion, if you ever feel that your investment strategy is all over the place and you find yourself moving from one stock to the next, never truly making the kind of returns that you want; with the help of coffee can investing, you can guide your investment towards achieving your financial goals.
FAQs
Can I create a coffee can portfolio for short-term goals?
The whole premise of coffee can investing is to “buy and forget.” Though the strategy is defined for the long-term, for the short-term, the average % of return would be comparatively less.
How to create a diverse coffee can portfolio?
Buy stocks of atleast five top-performing companies across different industries. Also, explore other indices, mutual funds, SIPs, etc.
As an investment fanatic, I’ve dabbled in early-stage startups, mutual funds, gold, stocks, smallcases, and real estate to identify which assets generate the highest ROI. At Tickertape, I’m dedicated to presenting my learning and providing insightful suggestions to help my readers make sound investment decision.
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