How to select best stocks in 10 minutes?

Coffee Can

If you would have invested 1 Lakh 15 years ago it would have become 36 Lakhs today.

Coffee can investment (Buy and Hold Long Term Investments)

In this article we will talk about a strategy (Coffee Can Investment) which will help you pick the best stocks in less than 10 minutes.

Advantages:

1. No Fees
2. No Need to track the market
3. Low chance of negative returns

How to build your own Coffee Can Portfolio?

Coffee can investing is a book by Saurabh Mukherjee. In this book he put out few metrics.

Metric#1: Revenue Growth:

Every company is trying to sell something Infosys is selling their solutions, Dominos is selling their pizzas, now if the sales and revenue is growing over the time that means the company is still relevant as it was over the pas few years. Makes sense ? Right?

The criteria is that the companies should grow their revenue growth 10% each year for the last 5 to 10 years.

Metric#2: Return On Equity:

Now ROE=Net Income/Shareholder’s Equity

The ROE should be more that 15% per year: Average of >15% each year for the last 5 to 10 years.

Confused about ROE ? Let me make this simple for you!

Let’s say there’s a company ASHUTOSH LTD. Lets assume this company has total assets of 300 rupees, and their liability debt sum up to 100 rupees.

So in this case if you subtract liability form their total assets then whatever will remain that would belong to company’s owners or Shareholder’s Equity.

Here in the case of Ashutosh Ltd.

Shareholder’s Equity = 300–100=200 Rs.

Continuing further, Last year’s NET INCOME of Ashutosh Ltd was 20 Rs. So here the Return On Equity or ROE will be: 20/200 i.e 10%

Got it? Cool ?

METRIC #3: Return On Capital Employed [R.O.C.E.] :

ROCE= Your Earning Before Interests and Taxes/ Total Capital Employed

Criteria: Average of >15% per year on an average

Disadvantages Of Traditional Coffee Can:

The biggest disadvantage is that we are only investing in the company on the basis of their historical performance.

But the right way to invest is you try to find out the future cashflows of the company right?

So to tackle this, your coffee can portfolio should at least consist 10 -15 companies with great track record. So what will happen your 1–2 companies will perform below expectations! But on the other side rest of your companies will earn so much that they would take care of your losses.

Now the BIGGEST PROBLEM is there are 5000 companies listed on BSE(Bombay Stock Exchange). So how will you filter out your winning companies quickly?

Step by Step Solution:

To filter out quickly we need a tool, the tool we will use is Ticker Tape.

1. Simply visit https://www.tickertape.in/screener
2. Now here you can add any filter.
3. Add 3 filters discussed above.

It will take you less than 3 minutes!

Now you can easily find your best companies.

If you wish you can just stop your analysis here, but if you want more confidence, I would recommend you to understand the businesses, so that if tomorrow your company is performing below expectations you don’t panic and continue your investment journey. C’mon just sit 10 minutes more.

Examples of such coffee can portfolio companies are:(Not recommending you buy these stocks).

1. Pidilite
2. Asian Paints
3. Relaxo
4. Astral Ltd.

Hope you learned something new!

till then Happy Investing!