Forgotten Treasures

In the Wild West of the 19th century, people stored their most valuable possessions – money, jewelry, documents – in a simple coffee can. From this habit, the investment principle “buy and forget” was born.

The American investment manager Robert G. Kirby developed this concept in the 1950s and published it in The Journal of Portfolio Management in 1984.

Kirby got the idea when the husband of one of his clients passed away. With every buy recommendation his wife received, he quietly purchased $5,000 worth of the same stock for himself, but he never followed a single sell recommendation. He simply tossed the share certificates into a bank vault and forgot about them for decades.

When Kirby later reviewed the late husband’s estate, he found a large number of small positions. And one extraordinary success story: Haloid, later Xerox. That single holding had grown to $800,000, worth more than his wife’s entire actively managed portfolio. His passive “coffee can” approach had handily beaten professional management.

Buy, hold, and let go

Stories like this fascinate investors and prompt reflection on one’s own approach. The “coffee can method” is a powerful lesson in the magic of compounding and the strength of after-tax returns over time. But it only works if the right companies are chosen at the start. Those who fill their can with businesses that no longer exist after 30 years will be disappointed.

It also raises practical questions. Should one keep adding new stocks or stick with the original portfolio? How do new investments fit into the initial structure? The psychological aspect shouldn’t be underestimated either. Over time, only a few positions drive performance, or setbacks. Anyone following the coffee can method needs patience and composure.

Kirby’s example also reminds us that you need at least one big winner. Without the outlier Xerox, this story would never have been told.

The core of the Gutmann equity strategy takes a different path. We also start with equal weights, but we regularly rebalance. Extreme outliers like Xerox – in either direction – won’t be found in a Gutmann portfolio. The result is a portfolio that stays balanced and disciplined over time.