Pieter Slegers — The Coffee Can Millionaire
A short #QualityTuesday issue: Bob Kirby's 1984 coffee-can story told with its actual numbers, a pilot's line about overconfidence, and a one-page FICO pitch two days after it was ranked Best Buy #5.
One-line take: a short format issue whose value is in one story told properly.
Bob Kirby's 1984 coffee-can parable is given with its arithmetic rather than as a slogan: a widow inherits her husband's certificates, puts them in a coffee can and forgets them for decades; when she opens it,
one holding is bankrupt, two returned nothing, and one $5,000 position has become $800,000 — a 160x. The moral drawn is narrow and deliberate: "
buy and forget the stocks you have absolute conviction in", not buy and forget everything. The distribution is the lesson — three of four went nowhere or to zero, and the portfolio still worked. The other durable item is a pilot's line, quoted from a flight home: "
The most dangerous thing in aviation isn't the storm. It's the pilot who thinks he can outfly it", used to make the case for accepting that "we may not outperform the markets every single year." The single security is
FICO, pitched two days after being ranked
Best Buy #5 and two days before being upgraded Hold→Buy on
7 May: a monopoly on US credit scores licensed to Equifax, Experian and TransUnion, "a toll bridge on lending", with
90% of top US lenders using it, the system "hard-coded into the global financial infrastructure", and ROIC "often above 50%" — and the selloff framed as the opportunity. Note that the regulatory threat that caused the selloff is not mentioned here at all; the moat is described as if untouched.
1. Stocks & names mentioned
One stock pitch and the three credit bureaus that distribute its product. The coffee-can story's holdings are anonymous in the original and are not tickers. Research legend: QT Qualtrim · SA Seeking Alpha · STK Stock Analysis. Written post with no timestamps — the At link opens the article.
| Ticker | Name | Research | View | What he said | At |
|---|
| FICO | Fair Isaac Corporation | QT · SA · STK · FA | Positive | The issue's stock pitch. "FICO has a monopoly in credit scores in the United States", licensing its algorithm to Equifax, Experian and TransUnion and selling decision-automation software to banks. "Every time you apply for a credit card, a car loan, or a mortgage, FICO gets paid a fee to provide your credit score. You can see it as a toll bridge on lending." The moat is attributed to "network effects and regulatory barriers", with three supports: 90% of top U.S. lenders use FICO; "the system is hard-coded into the global financial infrastructure"; and ROIC "often above 50%". Conclusion: "the current selloff could provide opportunities." Ranked Best Buy #5 two days earlier; upgraded Hold→Buy on 7 May. | read ↗ |
| EFX | Equifax | QT · SA · STK · FA | Neutral | Named as one of the three "major credit bureaus" FICO licenses its scoring algorithm to. No stance. | read ↗ |
| EXPN.L | Experian plc | SA · STK | Neutral | Named as the second of the three credit bureaus licensing the FICO score. No stance. | read ↗ |
| TRU | TransUnion | QT · SA · STK · FA | Neutral | Named as the third credit bureau licensing the FICO score. No stance. | read ↗ |
One omission worth flagging. This FICO pitch describes the moat as intact — a monopoly, hard-coded into infrastructure, protected by "regulatory barriers" — without mentioning the FHFA's VantageScore 4.0 decision, which the issue two days earlier named as the reason the stock is down over 55% from its peak. In a short format that is understandable, but "regulatory barriers" is precisely the part of the thesis that had just been tested. Note also the internal arithmetic of the coffee-can story as retold: "$5,000 grew to $800,000" is 160x, which is what the text says — but it is introduced as "a hundred-bagger stock", so the two labels sit slightly apart.
2. Talking points
The coffee can, with the numbers attached
- Bob Kirby, 1984. A widow inherits her husband's share certificates, puts them in a coffee can, and forgets them for decades.
- The result on opening it: "one company had gone bankrupt, two others had no returns, and the last one? A hundred-bagger stock." The $5,000 position had become $800,000.
- The distribution is the point, and it is the part usually left out: a 25% hit rate produced the whole return, and the three failures cost nothing that mattered because they were never sold at the bottom.
- The moral is stated carefully: "buy and forget the stocks you have absolute conviction in" — conviction is the entry condition, not an outcome of the strategy.
The Richest Man in Babylon, in three lines
- George S. Clason's classic reduced to its three rules: "pay yourself first; control your expenses; make your money work for you."
- Notable for what it is not: none of the three is about stock selection. The archive's usual subject is which companies to own; this is about having something to invest in the first place.
The pilot's line
- "The most dangerous thing in aviation isn't the storm. It's the pilot who thinks he can outfly it."
- Applied directly: "as investors we do not have any control over the markets. We are humble enough to know that we may not outperform the markets every single year."
- The claim that follows is the archive's standing bet: "in the long-run we only need to be right about a few exceptional businesses and have the patience to let them work for us" — which is the coffee-can distribution restated as a policy.
- Worth reading alongside the April scorecard, where the portfolio's three-year return was 5.6% against the index's 22.3%. This is the paragraph that has to carry that.
Ardal Loh-Gronager and The Perceptive Investor
- A previously published interview is recirculated, with the book named. Book and author only; no securities discussed.
FICO, pitched without the controversy
- The mechanics are cleanly stated: FICO licenses the algorithm to the three bureaus and sells decision software to banks, so it is paid on every credit card, car loan and mortgage application. "A toll bridge on lending."
- Three quantified supports: 90% of top US lenders, embedded in the financial plumbing, and ROIC "often above 50%".
- What is missing is the FHFA decision that caused the selloff the pitch is recommending buying into. "The current selloff could provide opportunities" is the only reference to it.
- Sequence worth noting: Best Buy #5 on 3 May, pitched again here on 5 May, upgraded Hold→Buy on 7 May. Three appearances in five days.
What this format is for
- #QualityTuesday is explicitly a five-minute format: "I'll teach you 5 things about the stock market in less than 5 minutes." One idea, one book, one behavioural point, one interview, one pitch.
- It is the archive's least analytical output and its most quotable — worth reading as marketing for the paid research rather than as research itself.
3. In plain English
A jargon-free summary of the thesis behind each argued name. (Renders on each name's consolidated page.)
FICO — Fair Isaac Corporation Positive
FICO invented and owns the credit score American lenders use. It does not deal with borrowers directly — it licenses the scoring formula to the three credit bureaus, Equifax, Experian and TransUnion, and sells software to banks that automates lending decisions. Every credit card application, car loan and mortgage generates a fee. It is, in the phrase used here, a toll bridge on lending.
Three numbers support the moat. Ninety per cent of the largest American lenders use it. The score is embedded in the plumbing — regulations, bank risk models and software written over decades all assume it. And the return on the capital invested in the business is often above 50%, which is what you would expect from something that sells a formula rather than a product.
The pitch closes by pointing at the share price: "the current selloff could provide opportunities."
One thing a reader should supply for themselves, since this short issue does not: the selloff happened because the US housing regulator approved a competing score for mortgages, taking the shares more than 55% below their peak. The fuller argument for why that matters less than it looks is in the Best Buys issue published two days earlier.
Summary derived from the archived Compounding Quality post (text in transcript.txt) for personal study. Not investment advice. © Compounding Quality / Pieter Slegers for source material.