हिंदी – Coffee Can Investing by Saurabh Mukherjea


Hello investors, my name is Sagar and in this video we are going to talk about one book this book tells you how to make a simple portfolio without doing much research The name of the book is Coffee Can Investing and it’s written by Saurabh Mukherjea , Rakshit Ranjhan and Pranab Uniyal Saurabh Mukherjea was the CEO in Ambit Capital for several years and he shares his investing philosophy in this book He is also the founder of Marcellus Investment managers. Let’s start with the objective of this book This book will help you achieve financial independence with the help of equities The name ” coffee can ” refers to the era when Americans saved their valuables in a coffee can and kept it under a mattress The book will help you construct your own portfolio of equities with three simple steps Firstly, the market cap of selected companies should be more than 100 crores. Companies smaller than 100 crores will probably will not have a clear past record and their credibility is not clear Secondly, we want revenue growth of 10 % each year in the past 10 years Please keep in mind, it’s 10 % ever year in the past. The Indian economy is growing around 6 – 7 % annually hence, a good company should be able to grow 10 % easily Indirectly, this also means that the company has some competitive advantage that allows them to keep growing Thirdly, we want ROCE (return on capital employed) of more than 15 % . Let me explain what ROCE is first. Any money that is put inside the company which can be debt for example the profit we can generate from the capital is ROCE You don’t want ROCE less than 15 %. Indirectly it tells you that the management is capable of allocating the capital correctly If a company keeps increasing their revenue every year, they will also increase their free cash flows and we would like them to use that capital wisely so they can keep growing continuously They also provide two metrics for financial companies. Firstly, you want to have loan growth of 10% as financial companies earn money by giving loans This also indicates that the company has something good and that’s why they can keep growing at that rate Secondly, we have ROE (Return on equity ) Let me explain what does it mean In any balance sheet, you have assets and liabilities If you subtract the liabilities from the assets you will have equity The amount of profit the company can generate on that equity is known as ROE In this case, we are looking for 15 % of ROE It’s important to know that you will have to track their past 10 year performance As you already know, there are many cyclical companies and they keep fluctuating If a company keeps growing at more than 10 % for the last 10 years , then it doesn’t have a cyclical pattern You also need to remember that you will be investing for the next 10 years to see the best results Of course, not each stock will be a multibagger but you will have 3 or 4 stocks which perform very well 5 or 6 stocks will give you market returns but then you will have some stocks, which will deliver negative returns but after 10 years, the portfolio will still outperform because of the 3 or 4 multibaggers Let’s talk about their advantages. Firstly, there isn’t any expense ratio as there is no mutual fund involved Secondly, as you will buy the stocks just once, there won’t be more transaction costs Thirdly, you won’t have to care about their valuations. In my analysis videos. I always talk about valuations because I think it’s very important According to this book, you don’t need to check their valuations. Because you will be following those 3 metrics and invest in the selected stocks . What hey have observed is that the market is India is very special. In other markets, when you buy undervalued stocks, you can achieve better results but in the case of India, it’s bit different. If the company has great management and business and has consistent earnings together with future earning visibility the valuations are not so important. This applies only to Indian companies. I would like to highlight the fact that this book has been written to help you financially. Your portfolio has to be planned accordingly. They are not suggesting you to invest all your capital in small caps They do mention the importance of diversification and a balance mix between large, medium and small caps As you already know, small caps will fall more than the broader market in a market correction. That’s why they mention medium and large caps as well. Large caps will provide some stability to your portfolio Maybe you can invest more in small caps if you want to achieve greater returns Lastly, a small part of your portfolio should be of debt you can buy bonds of certain companies If you would like to see more videos on other books just write them in the comment and don’t forget to subscribe

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