Most people invest in the usual assets: real estate, gold, mutual funds, fixed deposits and stock markets. It’s always the same four or five instruments. All they end up making is a measly 8 to 12 per cent per annum. What if there was another way? In Coffee Can Investing, Saurabh will show you how to go about low-risk investments that generate great returns.
Here’s an excerpt from this book.
“The ancient Romans were used to being defeated. Like the rulers of history’s great empires, they could lose battle after battle but still win the war. An empire that cannot sustain a blow and remain standing is not really an empire.” – Yuval Noah Harari, Sapiens: A Brief History of Humankind 18 (2011)
Many historians take the view that the “greatness” of a kingdom or an empire should be measured by its longevity. How long did the empire sustain? How durable was the empire? By this measure the first great empire was arguably the Persian Empire. Founded around 550 BC, it lasted for around 200 years until Alexander the Great brought it to an end in 330 BC by defeating King Darius III. However, if longevity is the measure of a great empire, then the Roman Empire is by some distance the greatest empire that the world has ever seen. Whilst the first Roman republic, headquartered in Rome, lasted from 100 BC to 400 AD, the imperial successor to the Republic lasted for a staggering 1400 years before falling to the Ottoman Turks in 1453. So ubiquitous is the influence of this empire, the language in which we are writing this book, the legal system which underpins the contract between the publisher and the authors of this book, the mathematical concept of compounding which underpins much of this book, all of them come more or less directly from the Roman Empire!
When it comes to investing in stock markets, greatness is defined as ‘the ability of a company to grow whilst sustaining its moats over long periods of time’. This then enables such great companies to sustain superior financial performance over several decades. The Coffee Can philosophy of investing is built using the twin filters to identify great companies that have the DNA to sustain their competitive advantages over 10-20 years (or longer). This is because ‘greatness’, which the coffee can portfolio seeks, is not temporary and it is surely not a short-term phenomenon. Greatness does not change from one quarterly result to another. In fact, great companies can endure difficult economic conditions.
Their growth is not beholden to domestic or global growth – they thrive in economic down cycles as well. Great companies do not get disrupted by evolution in their customers’ preferences or competitors or operational aspects of their business. Their management teams have strategies that deliver results better than their competition can. These great companies effectively separate themselves from competition using these strategies. Over time, they learn from their mistakes and increase the distance between themselves and their competition. Often, such companies appear conservative. However, they do not confuse conservatism with complacency – these companies simply bide their time for making the right moves. These traits are common among great companies and rarely found outside great companies.