The Coffee Can Portfolio is premised on the idea that we can identify quality assets that will appreciate over time. Such assets include real estate, stocks, gold, silver, other commodities, bonds, and even cryptocurrency. Here are the best performing assets of 2023 (ex-crypto):
Stocks are my favourite asset class, as they tend to outperform over a long enough time horizon. US Technology and Large Cap Stocks in particular have led the way over the past 30 years.
However, more recently a serious case can need to be made for Bitcoin. Although the great and late Charlie Munger called it "rat poison", Bitcoin has outperformed every asset class in 8 of the last 10 years.
Be that as it may, the problem with Bitcoin is that -- even if a fundamental case can be made to add it to the coffee can -- it's unpredictable, volatile, and difficult for the average retail investor to understand.
The biggest mistake an investor can make is to invest in something they don't understand. As Peter Lynch said in One Up On Wall Street, "There seems to be an unwritten rule on Wall Street: if you don't understand it, then put your life savings into it".
The Coffee Can Portfolio only works if you understand what you're putting in it, and can be reasonably confident that it will appreciate in value over time. The easier something is to understand, the more predictable it is, the better. As Lynch puts it:
An example of a simple, easy-to-understand, and predictable asset is the Polish company Dino Polska ($DNP.WA). Dino Polska has been Poland’s fastest growing supermarket chain over the past decade. Since 2010, store count has grown from 111 to 2,406, a 25.16% CAGR.
Currently, ~80% of Poland’s population lives outside of large cities in rural towns, suburban towns, and city outskirts. DNP’s stores are located in these “small-town” geographies and target this 80% segment of the Polish population.
Most importantly, Dino Polska is able to leverage its presence in small town Poland to create an unrivalled value proposition for consumers: a full assortment of groceries that are affordable and easily accessible.
Due to various structural competitive advantages (small store footprint, optimal location, and primarily owned rather than leased land), Dino Polska is able to continually expand its network at the expense of larger competitors.
Overall, Dino Polska is a high-quality, founder-led, customer-centric company with proven business model and an excellent track record of capital allocation. What's more, Dino Polska has created incredible value for shareholders over time. It's a great "coffee can" candidate.
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