Ambit Coffee Can Portfolio

KEY PORTFOLIO ATTRIBUTES #

Year of Inception 2017-03-06
Number of Stocks 20
Alpha (1Y) -9.38%
Beta (1Y) 0.42

About AMBIT CAPITAL

Ambit is one of India’s premier providers of financial advice and capital, focused on delivering tailor-made financial solutions that are suitable to clients’ needs. These are based on deep understanding of the Indian economy and market forces, unmatched research and client-focused approach. Their business acumen gives them the ability to see the big picture and understand the levers that affect the business drivers through smart decisions and actions that can increase the long-term profitability for clients resulting in sustainable growth.

Investment Objective

Ambit Coffee Can Portfolio’s investment objective is to build a portfolio of resilient companies that aims to deliver steady returns with minimal risk to create wealth over the long term.

Ambit Coffee Can PMS is a large cap oriented portfolio that invests in high-quality franchises that consistently sustain their competitive advantages over long periods of time despite being faced by challenges and disruptions at regular intervals.

Investment Strategy

Ambit Coffee Can PMS is a concentrated portfolio with a low churn (<=1 stock p.a. on an average). It invests in great companies with a proven track record of consistent growth and high RoCE.

• Lower drawdowns during the market crash. On average, the percentage fall in Ambit Coffee Can PMS Portfolio is less than half of the broader market during a market-wide crash. This is because Coffee Can Portfolio companies valuations are supported by robust fundamentals/earnings.

• Low churn in the portfolio. On average, Ambit Coffee CAN PMS has no more than 5-10% churn in a year compared to 40-50% churn for most mutual funds. As a result, the Ambit Coffee Can Portfolio incurs negligible brokerage costs, capital gains taxes, and expense ratios, and thereby benefits the most from the power of compounding.

• No need to time entry/exit from this portfolio. Given the evergreen nature of the constituent companies, an investor can generate healthy returns from the Ambit Coffee Can PMS Philosophy regardless of bull/bear runs in the broader markets, regardless of whether the external economic environment is good or bad, and regardless of the number of years of since when the portfolio has been chosen by the investor.

• Selection Process

Look for companies that have a consistent track record of growth and wealth creation for their stakeholders over long periods. A clean corporate governance track record and consistency is what brings a company into the coverage universe.

• Growth Investing

Coffee Can Portfolio is based on growth investing. The mantra is that quality comes at a price and always pays in the long run.  The team at Ambit believes that as long as earnings continue to grow, the stock price will follow, albeit in a non-linear fashion.

• Consistent returns with minimal risk

Steadfastness is the key. Wealth creation is a marathon and not a sprint. Did you know a steady 26% return over 20 years makes your portfolio 100x?

Investment Philosophy

Ambit Coffee Can Investing is an interesting investment strategy to make successful equity investments.

It’s a strategy that promises impressive wealth creation with ‘Less risk’.

“Coffee Can Investing” is a term coined by Robert G. Kirby who is considered as one of the greatest investment advisors of all times. The concept of “Coffee Can Investing Portfolio” has its roots in Old West America where people used to hide their valuables in the coffee cans and then the cans were put under a mattress to be kept for years or even decades.

Mr. Kirby thereby suggested that investors should follow Coffee Can Investing approach. They should identify such invaluable companies and invest for at least 10 years.

It includes companies which have decades of experience, strong brand value and competitive edge. These companies are least affected by the change in the stock market. During the difficult times, they might have to increase the prices but it won’t affect them. For instance, if ITC increases the prices on cigarettes people won’t stop buying them because of an increase in price.

Ambit Coffee Can PMS Investing strategy neither works on value nor growth; it works on quality investing. It selects a company with at least 100 cr. of market cap. The list is further short-listed to companies which have:

• Been around in the market for at least 10 years,

• Delivered revenue growth of 10% and

• Return on capital employed of 15% in each of these 10 years.

The success of Ambit Coffee Can Investing strategy depends entirely on the wisdom and foresight to select the objects to be placed in the coffee can, to begin with.

Professional money managers rarely produce a return superior to that of a broad-based, unmanaged portfolio. Hence, the notion that a Coffee Can Investing portfolio can outperform an actively managed portfolio is not without a basic logic.

This philosophy of Ambit Coffee Can PMS is built to identify great companies that have the DNA to sustain their competitive advantages over ten, twenty, thirty years (or longer). This is because the ‘greatness’, which this coffee can portfolio seeks, is not temporary, so, is surely not a short term phenomenon. Great companies endure difficult economic conditions and do not get disrupted by evolution in their customers’ preferences or competitors, or operational aspects of the business.

Often such companies appear conservative, however, they do not confuse conservatism with complacency. Their management teams strive and strategize to deliver results better than the competition, year after year. These traits are rarely found outside of great companies. Given the desire for longevity and consistency of performance around ROCE & Revenue growth, Coffee Can Investing is oriented towards B2C over B2B sectors.

Beating the market is not so easy. It requires perspective, patience, and courage. Your most successful investments grow in value, you make partial sales and transfer the capital involved to your less successful investment that has gotten cheaper. The process results in a stream of capital being transferred from the most dynamic companies, which usually appear somewhat overvalued, to the least dynamic companies, which usually appear somewhat undervalued.

Investment Philosophy

Ambit Coffee Can PMS’ ideology states that good risk adjusted returns is an outcome of Good Processes characterized by:

Stringent quantitative filters

  • ▪ Each offering is based on deeply researched and back tested framework to generate the investment universe
    ▪ High threshold for performance over long spans of time, greatly minimize chances of poor performers or poor quality companies entering into the investment universe
    ▪High quality of accounts and corporate governance is uncompromised
  • Experienced team & deep-dive research

    • ▪  Dedicated and experienced research team
      ▪  Research processes inspired by IE Research
      ▪  Investment Committee to approve all investment decisions
      ▪  Part of larger Ambit group lends advantages
      ▪  Focus on what is knowable and what is important
    • Focus on earnings growth + earnings quality

      • ▪  Lower obsession with timing when one is investing in a superior calibre of companies
        ▪  Companies with a consistent track record and leadership traits are preferred
        ▪  Past track record + Future sector potential + Current management capabilities = Comfort on delivering quality earnings
      • Risk Management
      • ▪  Concentrated Portfolios deliver best returns as returns do not get average out
        ▪  Lower drawdowns due to consistent performers in secular sectors
        ▪  Long term orientation with low churn realize the power of compounding

Awards & Achievements (Across Ambit PMSs)

In 2021, Ambit Coffee Can Portfolio was awarded Rank #3 as the Best PMS in the Multi Cap category, on a 3Y Risk-Adjusted Returns. These Awards were hosted by PMS AIF WORLD, in association with IIM-Ahmedabad.

Performance Table #


Trailing Returns (%) 1m return 3m return 6m return 1y return 2y return 3y return 5y return 10y return Since inception return
Ambit Investment Advisors Coffee CAN-2.39%9.09%4.91%19.17%6.18%11.54%14.63%-16.33%
Nifty 50 TRI0.02%14.00%10.48%24.35%13.28%18.20%16.30%15.08%

QRC Report Card *




VIEW DETAILED QUALITY, RISK, CONSISTENCY ANALYSIS

Portfolio Holdings


Holding %
HDFC Bank Ltd 9.00
AXIS BANK LTD 8.00
Asian Paints Ltd 7.00
Page Industries Ltd 7.00
TATA CONSULTANCY SERVICES LTD 6.00
ICICI Bank 6.00
Pidilite Industries Ltd 6.00
Nestle India 6.00
Avenue Supermarts 6.00
Astral Poly 6.00
Titan Industries 6.00
Eicher Motors Ltd 6.00
LTIMindtree Ltd 6.00
ITC Ltd. 5.00
PI Industries Ltd 5.00
Havells India Limited 5.00
Top 16 Equity Holdings 100.00

Sector Allocation


Holding %
Consumer Staples 12.00
Consumer Discretionary 17.00
Building Materials 23.00
Financial Services 25.00

Market Cap Allocation


Allocations %
Large Cap 79
Mid Cap 13
Small Cap 6
Cash 2

Do Not Simply Invest, Make Informed Decisions

WISH TO MAKE INFORMED INVESTMENTS FOR LONG TERM WEALTH CREATION

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Disclaimer

#Returns as of 31 Jan 2024. Returns up to 1 Year are absolute, above 1 Year are CAGR.

*QRC Report Card data is updated quarterly. Current data is as of Dec 23.


Do Not Simply Invest, Make Informed Decisions

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