Coffee Can Portfolio 2024 – List of Stocks [Low Risk Stock Picking Tips]

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“Compound Interest is the eighth wonder of the world. He who understands it earns it… he who doesn’t… pays it.”

Albert Einstein 

If you already know What a Coffee Can Portfolio or Coffee Can Investing is, jump right to the main topic of the blog – How to invest in the Coffee Can Portfolio.

If you’re here just to see the list of coffee can portfolio 2024 stocks, jump right here.

If there is one key learning to safe investing in the stock market, it is to buy stocks of “good companies” and hold them for long. Holding stocks for long harnesses the power of compound interest – the returns are automatically reinvested. The key thing to note is that compound interest really starts earning for you over long time periods.

We can have 100 possible definitions of “good companies” and I will cover one later in the blog. 

Here’s what I plan to cover (feel free to click on the relevant link) –

• What is Coffee Can Portfolio/ Investing?
• How did Coffee Can Investing become popular in India?
• How to invest in Coffee Can Portfolio?
• How did I source the data to be able to create the portfolio and invest using the coffee can investment technique?
• Coffee Can Portfolio 2020
• Coffee Can Portfolio 2021
• Coffee Can Portfolio 2022
• Coffee Can Portfolio 2023
• How are the previous portfolios performing?
• ✨✨ Coffee Can Portfolio 2024 *NEW* ✨✨ 
• How can I invest in a Coffee Can Portfolio using Zerodha Smallcase?
• Are there any alternate ways to invest in the Coffee Can Portfolio?
• Conclusion

What is Coffee Can Portfolio/ Investing?

Coffee can? How does this even relate to investing?

It dates back to Old America when people would put their valuables – money, jewellery in a coffee can under the bed and not touch them for a long time and use them for large purchases or emergency. 

The implementation of the concept in today’s world is simply “buy and forget” – in other terms having a long horizon for the investment. Long term also ensures that we give these good companies complete economic cycles to show it’s performance – removing the impact of recession/ downturns/ temporary negative sentiments that result in a drop in share prices.

How did Coffee Can Investing become popular in India?

It was made popular by Ambit Capital and the book written by Saurabh Mukherjea, Rakshit Ranjan, Pranab Uniyal – “Coffee Can Investing: The Low-Risk Road to Stupendous Wealth”. As you can see in the Google Trends chart above, the popularity of the term coincides with the launch of the book in early 2018.

The co-authors since then have moved on from Ambit capital. Saurab Mukherjea and Rakshit Ranjan went on to build Marcellus Investment Managers and Pranab Uniyal joined HDFC Securities. In Marcellus, the portfolio based on this strategy has been renamed from Coffee Can Portfolio to Consistent Compounders Portfolio.

Whats so special about the Coffee Can Portfolio?

As you can see below, these portfolios have outperformed the benchmark Sensex index both on an absolute as well as on a risk-adjusted basis.

How to invest in Coffee Can Portfolio?

Creating the portfolio, simplified, is a 3 step process

1. Find good companies (stocks) – that becomes your “portfolio” for that particular year
2. Invest in them in equal amounts and hold them for 10 years – if there are 8 companies in the portfolio and you want to invest INR 4 Lakhs, invest 50K in each of the stocks (4,00,000/8 = 50,000)
3. Churn a few companies annually based on the “rule” (I will explain that later)

STEP 1: Find good companies

This clearly is the most important step of the whole process. For the current year, you should pick stocks that, for each of the last 10 years, have 

1. ROCE (Return on Capital Employed) > 15% (Starting this year, in the Coffee Can Portfolio 2023, I am using ROE (Return on Equity) instead to be able to include Banks and NBFCs.
2. Sales growth (over previous year) >10%

For each company in the Coffee Can Portfolio (valid from Apr to Mar of next year), this should hold true for each of the previous 10 years. 

From the list above you can add some more filtering criteria as you see below

1. Market capitalisation > 5,000 Cr or 10,000 Cr – This would weed out the micro/ small-cap companies where there might be a risk of irregular compliance/ audit/ annual reporting/ operator influence.
2. Recent changes made by the government that impacts the industry of the stock. For this, you will need to google search about the company and read about information from the last 12 months
3. If there are two very similar stocks in the portfolio, you might think you picking one of them with the better results
4. Stocks whose price is a high value – these will make it difficult to buy stocks in the same ratio e.g. ABBOTT (INR 23,171 as on the day of writing). You can keep these stocks but your SIP amounts will be quite high.

STEP 2: Invest equal amounts in them

You can use your existing broker (e.g. ICICI Direct/ Indiabulls) or can use Zerodha/ Groww or similar discount brokers.

You can invest in the portfolio for the current year (Coffee Can Portfolio 2024 as on date) multiple times.

There are three strategies you can follow –

Strategy 1: Invest once a year

This will be beneficial for investors who have a pool of money to be invested. It can be used by

1. Salaried employees who receive annual bonus around the same time every year
2. Reinvesting sale of an asset – can be real estate, mutual funds or other stocks

Strategy 2: Systematic Investment Plan (SIP)

You can use Zerodha’s smallcase tool for this. It lets you create a custom portfolio and track the growth and with performance respect to Nifty. The first investment has an initial value which will be based on the current stock prices and the weighting scheme you have chosen. For the purpose of Coffee Can Investing, it will be “Equi-Weighted”.

I will show how it looks in the next section where I discuss the Coffee Can Portfolio 2020. 

Here’s a detailed review on smallcase.

Strategy 3: Buy on dips 

You can decide on a rule and invest when there is a substantial dip in the market. It can be a 5% dip in portfolio in a single day or 8% dip in a week or 10% dip in a month. 

To track this you can create a watchlist on websites like Trendlyne. The stocks below are from the 2020 portfolio. You can see the CCP 2024 stocks here.

STEP 3: Churn companies annually

Every year, after all the annual reports are out, it will be required to do fresh calculations and get the list of stocks for the particular year. The timing is a bit tricky here. Companies start publishing their annual reports in May and go on for the first half of the year. For this reason, it might make sense to invest in the current years portfolio from July to June next year.

E.g. Invest in Coffee Can Portfolio 2024 from July 2024 to June 2025 (till Coffee Can Portfolio 2025 is out).

How did I source the data to be able to create the portfolio and invest using the coffee can investment technique?

I used data from Morningstar to do the analysis using a python script. You need last 10 years sales growth and ROE for all the listed companies.

You can buy the data from multiple sources. There are companies that provide an API for the data (will be paid). You can get the data from Bloomberg terminal as well. 

If you have access to none of the above, you can create a screener on screener.in. 

This is the Coffee Cup Portfolio Screener I created using the below query

Sales growth 10Years > 10 AND

Sales growth 7Years > 10 AND

Sales growth 5Years > 10 AND

Sales growth 3Years > 10 AND

Sales growth > 10 AND

Average return on capital employed 10Years > 15 AND

Average return on capital employed 7Years > 15 AND

Average return on capital employed 5Years > 15 AND

Average return on capital employed 3Years > 15 AND

Return on capital employed preceding year > 15 AND

Return on capital employed> 15 AND

Market Capitalization > 10000 Cr

Please note that all the screeners that I could find do not follow the portfolio “rules” completely. It doesn’t guarantee sales growth > 10% and ROCE > 15% for each of the last 10 years. Instead, it has CAGR values for the last 1, 3, 5, 7, 10 years which is a much more relaxed criteria than having it for each year. e.g. Year 1 = 2% and Year 2 = 22% is more relaxed then Year 1 = 12%, Year 2 = 12%

Each stock that satisfies the “each year” criteria will also show up in the above screener. The reverse is not true. 

Having said that, you can totally use the above rule to build your coffee can portfolio. The end goal is to have a rule to get a set of “good companies”.  

For the CCP 2020, the original rule (ROIC > 15%, Sales Growth > 10% each of the last 10 years) didn’t return a single company!

Even reducing it to each of the last 7 or even 5 years didn’t return any companies.

The rule boiled down to ROIC > 10%, Sales Growth > 10% for the last 5 years and Market Capitalisation > 10,000 Cr.

Here are the stocks for Coffee Cup Portfolio 2020

(Click here for the current 2024 portfolio)

1. Alkem Laboratories
2. Dr Lal PathLabs
3. Larsen & Toubro Infotech
4. Avenue Supermarts
5. Abbot India

I had to take Abbot India off the portfolio due to the current market price of the stock so it was not being feasible to keep these as a part of a monthly SIP. If you are looking at one-time investing or a larger value SIP, you can include that.

Digging deeper into my data, I also realised that taking just the Return on Invested Capital (ROIC) will exclude the banks and NBFC which will not be a very good idea as we are expecting a good amount of growth in these verticals. I considering Return on Equity (ROE) in my calculation.

As a I result, I started another smallcase with the following superstars! A couple of changes from the initial smallcase – this time I

1. picked companies with >10% ROE for the last 7 instead of the last 5 years.
2. included companies with <10K Cr Market cap

Also, I left out Bajaj Finance and Bajaj Finserv since the SIPs were becoming expensive (one can include those and maybe do a quarterly SIP).

Total money put in INR 13,752.

SIP from subsequent months were around INR 11,000.

1. HDFC Bank
2. CreditAccess Grameen
3. Kotak Mahindra Bank
4. Aavas Financiers
5. Arman Financial Services
6. MAS Financial Services
7. AU Small Finance Bank
8. Indusind Bank

The initial investment was done in November 2020 and I added SIPs every month till CCP 2021 started in June 2021.

Coffee Can Portfolio 2021

The rule that I followed for the coffee can portfolio 2021 is this

1. Sales growth > 10% for each of the last 5 years
2. ROE/ ROIC > 10% for each of the last 7 years

For this year, I had relaxed the condition of the market cap. For 2020 stocks, all companies had a 10000Cr + Market cap. This is to ensure that the portfolio has > 5 stocks to have enough diversification.

Unlike 2020 I plan to run one combined smallcase for NBFC + Non-NBFC stocks, which means that the initial investment will be higher (to have an equal weightage of all stocks). For subsequent months on the date of the SIP, I can choose to add an amount lesser than the original amount and the stocks will be bought in a way so that the result is as close as possible to an equi-weighed portfolio i.e. if there are n stocks and total portfolio size is p then each stock is of a value close to (100/n)%

Here are the 8 stocks for this years investment

1. Kotak Mahindra Bank (KOTAKBANK)
2. GMM Pfaudler (GMM)
3. Apollo Pipes (APOLLOPIPES)
4. Poly Medicure (POLYMED)
5. Dr. Lal PathLabs (LALPATHLAB)
6. Larsen & Toubro Infotech (LTI)
7. AU Bank (AUBANK)
8. AAVAS Financiers (AAVAS)

Out of these GMM, APOLLOPIPES and POLYMED were new entrants while the rest have continued from 2020.

The initial investment was done on June 25, 2021 and I have been adding in SIPs every 2 weeks till CCP 2022 started in July 2022.

Coffee Can Portfolio 2022

For Coffee Can Portfolio 2022, there are no stocks where for each of the last 10 years you have ROCE/ ROE > 15% and Sales Growth > 10% so I made the rule slightly lenient in order to have a list of 5-10 stocks.

1. First I picked stocks with ROE > 15% and Sales Growth > 10% for last 5 years. This gave me 5 stocks.
2. Then I picked ROE > 10% and Sales Growth > 10% for last 5 years, This gave me 6 more names out of which I filtered out 4 (high price of stock, sales good but profit not that great etc.). Then I was left with 2 stocks.

Here’s the list –

1. Apollo Pipes (APOLLOPIPES)
2. Poly Medicure (POLYMED)
3. Dr. Lal PathLabs (LALPATHLAB)
4. Larsen & Toubro Infotech (LTI)
5. Alkyl Amines Chemicals (ALKYLAMINE)
6. Lancer Container Lines (LANCER)
7. Caplin Point Laboratories (CAPPL)

1-4 were also part of the CCP 2021.

Coffee Can Portfolio 2023

For Coffee Can Portfolio 2023, as like previous year, I made the rule slightly lenient in order to have a list of 5-10 stocks.

1. First I picked stocks with ROE > 15% and Sales Growth > 10% for last 5 years. This gave me 12 stocks.
2. Then I picked ROE > 10% for last 10 years and Sales Growth > 10% for last 5 years, This gave me 13 stocks.

The overlap of the above lists 1 and 2 were 9 stocks out of which I excluded Cg-Vak Software & Exports Ltd. since the Market Cap was too small. Was left with the following 8 stocks.

1. Agarwal Industrial Corporation Ltd
2. Ajanta Pharma Ltd
3. Poly Medicure Ltd
4. LT Foods Ltd
5. Navin Fluorine International Ltd
6. Jyothy Labs Ltd
7. Bajaj Holdings and Investment Ltd
8. Tata Elxsi Ltd

Only Poly Medicure Ltd was part of the CCP 2022 (and has been the top performer within the 2022 portfolio)

Initial Investment for CCP 2023: INR 60,508

Scheduled SIP: INR 15,000

Coffee Can Portfolio 2024 (* The CURRENT ONE *)

For Coffee Can Portfolio 2024, as like previous year, I made the rule slightly lenient in order to have a list of 5-10 stocks.

1. First I picked stocks with ROE > 15% for the last 7 years and Sales Growth > 10% for last 5 years. This gave me 8 stocks.
2. Then I picked ROE > 10% for last 10 years and Sales Growth > 10% for last 5 years, This gave me 6 stocks.

The overlap of the above lists 1 and 2 were 12 stocks out of which I excluded Prime Fresh Ltd., Shish Industries and Sigma Solve Ltd. since the Market Cap was too small (<1000 Cr). I was left with the following 9 stocks.

1. AAVAS Financiers Limited
2. COFORGE LIMITED
3. Sonata Software Ltd.
4. Poly Medicure Ltd
5. AU Small Finance Bank Limited
6. Bajaj Finserv Limited
7. Ajanta Pharma Ltd.
8. Cholamandalam Investment and Finance Company Ltd
9. PI Industries Limited

Poly Medicure Ltd & Ajanta Pharma Ltd. were part of the CCP 2023.

Initial Investment for CCP 2023: INR 60,508

Scheduled SIP: INR 20,000

This is the link to the Coffee Can Portfolio 2024 smallcase (link will open only on the smallcase app), in case you want to invest.

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🇺🇸 CLICK HERE IF YOU WANT TO INVEST IN US STOCKS USING THE SAME STRATEGY 🇺🇸

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How are the previous and current portfolios performing?

(as on July 3, 2024)

• CCP 2020 (excl. NBFC/ Banks) – 15% (XIRR)
• CCP 2020 (NBFC/ Banks) – 16.2% ⭐ (XIRR)
• CCP 2021 – 8.6% (XIRR)
• CCP 2022 – 23% ⭐ (XIRR)
• CCP 2023 – 24.2% (Total returns – Yet to finish 1 year hence XIRR still not calculated). Below you can see how the individual stocks are performing)

Last updated on July 3, 2024

XIRR% mentioned for previous years since monthly SIPs were added after the initial investment.

How can I invest in a Coffee Can Portfolio using Zerodha Smallcase?

I created this smallcase in 2020. The minimum initial amount for this smallcase was ~INR 10,500 (at the time of writing, based on the current market value of the portfolio stocks).

As in 2023, the minimum value is 15,000.

For subsequent SIPs, the minimum amount is INR 11,000 (as in 2023, it is 15,000). Every subsequent amount is invested in a way that the resultant weightage between the stocks is close to the original decided (equi-weighted).

This article details how SIPs work in smallcases

Are there any alternate ways to invest in the Coffee Can Portfolio?

You are bought into the investing strategy but do not have time to do the analysis? Use a Portfolio Management Service (PMS). For this particular strategy, Marcellus Investment Managers will be my pick. The core team are the same people who made this popular in India and are constantly doing analysis specific to this investment strategy.

Along with using ROCE and sales growth, Marcellus employs a whole team to perform due diligence into companies before making it part of the portfolio.

What’s the catch?

The minimum investment is 50L and you will have to part away with a small commission that is success-based. They make money when you make money.

Conclusion

1. Invest in “good companies” and invest long
2. This is for investors, not traders
3. CCPs, in their lifetime, go through multiple economic cycles. As a result, short deviances are nullified in the long term
4. Downside of a few stocks are disproportionately overpowered by the upside in a few stocks. The maximum downside is the value of the stock (can’t go below 0) but over 10 years, a multi-bagger can grow exponentially (there is no limit)
5. The list of stocks above will remain the same till all the annual reports are out for this financial year which will be in June/ July of next year (2025). Coffee Can Portfolio 2025 stocks will be shared post that.

Feel free to add your questions/ queries/ suggestions and observations in the comments below.