Coffee Can Next (Part 2): KWEB

Doubling Down on China

Link to Investment Scorecard

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On December 1, I revealed the first investment in my latest Coffee Can: Bitcoin. At that time, the price of Bitcoin was $38,000. Today it’s over $50,000. That’s a gain of +30% in under 3 months. Lucky us!

For those of you who are new here, I am a fan of the Coffee Can Portfolio, an “Active Passive” approach to investing. The idea of a Coffee Can is simple: Buy a basket of the best stocks you can and let them sit for years. You incur no costs with such a portfolio, and it is simple to manage.

To recap, our Coffee Can Rules are as follows:

Coffee Can Rules

• We will make 5 purchases in our coffee can.

• Any purchases must be held for a minimum 3-5 years.

• Our goal is to outperform the SPY during our holding period.

• I’m going to try and build this coffee can by mid 2024.

Second Investment: Doubling Down on KWEB

As you may recall, in September 2021, I wrote about investing in China -  China Internet: Too Big To Ignore. Unfortunately, so far I have been wrong. That said, I believe the thesis still holds, and now may be a better time to invest. So KWEB will be the second investment in Coffee Can Next.

You can read my thoughts about this investment in this article, but here are the cliff notes.

Background: In 2018, Warren Buffet wrote this about the US economy:

• “In 25 years–a single generation–1.2% annual growth boosts our current $59,000 of [US] GDP per capita to $79,000. This $20,000 increase guarantees a far better life for our children.”

• “Most American children are going to live far better than their parents did. Second, large gains in the living standards of Americans will continue for many generations to come.”

• “Two words explain this miracle: innovation and productivity.”

• Source: [Link]

Although he was referring to the US, why should China be any different? If history is any guide, as long as China’s per-capita GDP growth continues, China will generate significant wealth in the coming decades. As a proxy, we should see an appreciating Chinese stock market over time.

Thesis in short: 

• I don’t see why China’s per-Capita GDP isn’t significantly bigger 5, 10, 15, 20 years from now.

• As China’s middle class grows, I believe China’s GDP growth will be led by consumption. 

• Internet-enabled Chinese businesses should do very well over the long term. Because access to goods and services will continue to be democratized by technology. 

• KWEB, the China Internet ETF is a simple way to invest in this growth.

That makes 2 investments in Coffee Can Next:

1. BTC

2. KWEB

3 more to go. 

Then we wait.