Francis Chou

Francis Chou

Last Update: 02-13-2015
Related: Chou RRSP Fund

Number of Stocks: 23
Number of New Stocks: 2

Total Value: $382 Mil
Q/Q Turnover: 5%

Countries: USA
Details: Top Buys | Top Sales | Top Holdings  Embed:

Francis Chou Watch

  • Should you follow these analysts and buy Chicago Bridge and Iron

    Recent correction in oil prices have taken a toll on Chicago Bridge & Iron Company's (CBI) share prices and the stock has corrected ~50% from 2014 highs. However, according to many analysts, this correction provides a good opportunity to buy the stock. In his recent report, Jefferies analyst Luke Folta reiterated his buy opinion on the company. He considers the stock a bargain at current levels and has a price target of $75 on the stock. He believes divesture of assets and restructuring could generate more that $100 million in cash flow for the company in 2015 and 2016 which could be used towards stock buy backs.

    Another analyst, John B. Rogers of D.A. Davidson, is also bullish on the stock and has a $70 price target. He believes that with sustained earnings and cash flow, let alone growth, the stock can appreciate substaintially from the current level. He is optimistic on the company's backlog growth due to “LNG export facilities, new gas fired power plants, and other energy/downstream infrastructure that could be awarded in 2015.”


  • Francis Chou's New Buys

    Francis Chou (Trades, Portfolio) is the fund manager of Chou America Mutual Funds and he has been managing the Chou Funds in Canada since 1986.

    Web Page:


  • Chou Opportunity Fund Q4 Investor Letter – Discusses A Big Long Position in Sears

    Dear Shareholder,

    During the 12-month reporting period that ended on December 31, 2014, the Chou Opportunity Fund (the “Fund”) was up 4.88%, while the S&P 500 Total Return Index (the “S&P 500”) generated a return of 13.69% during the same period. The Fund’s past performance is not necessarily an indication of how the Fund will perform in the future.


  • Guru Francis Chou Answers Readers' Questions

    Francis Chou immigrated to Canada in 1976 with $200 to his name. Without a college degree, Chou worked as a telephone repairman for Bell Canada, then formed an investment club with co-workers after reading about Benjamin Graham's teachings. Today, Chou is the fund manager of Chou Mutual Funds. Below are his answers to questions from GuruFocus readers.

    Commodities have been in a severe bear market for the last three years. What are your thoughts on the valuation of base metal and energy companies at the moment?


  • Ask Your Investment Questions to Guru Francis Chou

  • Can Individual Investors Invest Profitably in the Stock Market with Value Investing?

    An anonymous user asked me to answer a question on quora the other day.

    Wanted to share my short response as it’s a common question.


  • Francis Chou Funds - Buys and Sells of Second Quarter

    Francis Chou (Trades, Portfolio)’s RRSP fund mainly invests in equity and debt of Canadian businesses, though it sometimes ventures into U.S. investments.  

  • Global Market Valuations and Expected Returns – April 4, 2014

    In January 2014, the U.S. stock market benchmark S&P 500 lost 3.36% after an excellent 2013. The enthusiasm went back as the market gained 4.31% over February. In March, it went up only 0.69%. The market benchmark S&P 500 closed at 1890.90 on April 2, 2014, which is the new record high. What is the situation in the other parts of the world? In March, the key indexes in Europe returned negative. Germany’s DAX index declined 1.40%. France’s CAC-40 index lost 0.38%. The FTSE 100 index was down 3.10%. Stock market performances in Asia were weak too. Japan’s NIKKEI 225 moderately decreased 0.09%. Hong Kong’s Hang Seng Index was down 3.00% and China’s SSE Composite index was down 1.12% due to the weaker-than-expected Chinese economic data.

    Seth Klarman has returned $4 billion to clients at 2013 year-end due to lack of ideas and has 40% of the portfolio in cash. In his 2013 letter to investors, he mentioned the Continuing Problems in Europe, “Europe isn’t fixed either, but you wouldn’t be able to tell that from investor sentiment. One sell-side analyst recently declared that ‘the recovery is here,’ a sharp reversal from his view in July 2012 that Greece had a 90% chance of leaving the Euro by the end of 2013. Greek government bond prices have nearly quintupled in price from the mid-2012 lows. Yet, despite six years of painful structural adjustments, Greece’s government debt-to-GDP ratio currently stands at 157%, up from 105% in 2008. Germany’s own government debt-to-GDP ratio stands at 81%, up from 65% in 2008. That doesn’t look fixed to us. The EU credit rating was recently reduced by S&P. European unemployment remains stubbornly above 12%. Not fixed.


  • Chou Funds Triples Investment in BlackBerry, Adds New Stock to Portfolio

    As with all of the Chou Associates Management Inc.’s funds, equities for the Chou RRSP Fund (Trades, Portfolio) are selected based on a company’s “balance sheet, cash flow characteristics, profitability, industry position, special strengths, future growth potential and management ability.” They are purchased if they sell at an acceptable margin of safety, and held for the long term.

    Top industry weightings for the fund are: 39.3% Consumer Services, 25.8% Basic Materials and 1.7% Financials, with 26.8% in cash.  

  • Francis Chou Comments on Dex Media Inc.

    Not every large holding worked out in 2013. R.H. Donnelley’s term loan was down from 68.90 cents on a dollar to 61.20 on a dollar as of December 31, 2013. We bought into it as we believed it was well covered by its earning power, assets, and covenants that are protective to debt holders. In addition, this term loan comes with a cash flow sweep, which means that any free cash flow remaining after all operational needs are met can be used to buy back debt at par from its holders. In April 2013, SuperMedia Inc. and Dex One Corporation, the parent company of R.H. Donnelley and Dex Media West, completed their merger, creating Dex Media, Inc. (DXM) — one of the largest national providers of social, local and mobile marketing solutions through direct relationships with local businesses. Dex Media estimates it will realize approximately $150-$175 million in cost savings by 2015, and expects to preserve Dex One’s remaining tax attributes of roughly $1.8 billion, which can be used to offset income attributable to the combined company following the completion of the transaction. We continue to believe that at current prices, R.H Donnelley is underpriced.


  • Francis Chou Comments on Resolute Forest Products

    The common stock of Resolute Forest Products (RFP) contributed significantly to the returns of the Fund. We do not normally buy common stock for the Fund but every now and then, due to restructuring, we receive shares for a debt security we hold. Such was the case with RFP. We received shares of RFP for our holdings in McMinn County, Tennessee revenue bonds. To cut a long story short, we purchased 15.48 million bonds for a total consideration of $155,800. We paid roughly one cent on a dollar for each bond, preparing to hold them for several years. We knew McMinn’s obligor was AbitibiBowater and we have been following AbitibiBowater story for a while (AbitibiBowater changed its name to Resolute Forest Products in 2011). McMinn bonds belong to a class of creditors that were in dispute with AbitibiBowater 7.95% class bonds, a dispute many thought would not likely be settled for several years. We figured that even if McMinn lost the lawsuit, and 100% of the disputed claim was awarded to the 7.95% class, we would not lose money on the McMinn bonds considering the price we paid. Lo and behold, a few months later, the lawsuit was settled and we received 52,564 common shares of RFP for our holdings of McMinn bonds. At the year-end price of $16.02, these shares of RFP were worth approximately $842,075.

    Such a windfall comes maybe once every 20 years and we would not recommend this case as a regular way to invest in bonds. You needed a seller who was desperate to sell his holdings within a short time frame but could not find a buyer. And in a fortuitous way, we had invested in RFP for several years and were well acquainted with the story and the lawsuit. Further, the outcome was also dependent on a quick favorable legal judgment. The lawsuit could have dragged on for years which would have diminished the annualized returns by a considerable margin.


  • Francis Chou Comments on Sears Holdings

    We believe that Sears Holdings (SHLD) is a misunderstood story. There are many moving parts but we believe Sears Holdings’ intrinsic value lies in its real estate assets. It also has other valuable assets such as Lands’ End, Kenmore, Craftsman and Diehard. Being a traditional department store has become a tough business during the last decade but, according to management, Sears is transitioning its historic focus on running a brick and mortar department store into a business that provides and delivers value by serving its members in the manner most convenient for them: whether in store, at home or through digital devices. The value of its real estate allows Eddie Lampert, the controlling shareholder and CEO, the time and money to effect the changes. If the transformation does not work out as expected, we believe the real estate values are high enough that we would not lose money in our investment at current prices after netting out all liabilities.

    In general, we believe that stocks and non-investment grade bonds are fairly valued. We do not time the market but when bargains are scarce, we are happy to hold cash equivalents as an alternative.


  • Francis Chou Comments on Dell Inc.

    We had a small holding in Dell Inc. (DELL). It was trading at $10.13 on December 31, 2012. After a protracted battle, the founder Michael Dell (Trades, Portfolio) was able to buy out the shareholders at a price of $13.75 per share, plus a 13 cent special dividend.


  • Francis Chou Comments on MBIA Inc.

    Our common stock investment in MBIA Inc. (MBI) has also performed well, increasing in value to $11.94 as of December 31, 2013 from $7.85 as of December 31, 2012. There was a big overhang on the stock and that was removed when MBIA Inc. and Bank of America settled their lawsuits. Although MBIA is cheap based on book value, it would make me sleep better if the company receives permission to start writing business again. Investing in companies, where the main operating business is mothballed for a while, makes it harder to evaluate its intrinsic value. Time is not on the side of investors in that type of business.


  • Francis Chou Comments on (OSTK) was the largest contributor to the positive performance of the Fund. The stock increased in value to $30.79 as of December 31, 2013, up from $14.31 as of December 31, 2012. At the beginning of the year, we had 875,931 shares, comprising just over 30% of the portfolio. As the price of OSTK has now risen significantly and is trading closer to its intrinsic value, we have drastically reduced our position. We held only 15,000 shares as of December 31, 2013.


  • Canadian Guru Francis Chou's Annual Letter - He Believes Sears Holdings Offers Misunderstood Value

    Dear Shareholder,

    During the year 2013, the Chou Opportunity Fund (the “Fund”) was up 29.82%, while the S&P 500 Total Return Index (the “S&P 500”) generated a return of 32.39% during the same period. The Fund’s past performance is not necessarily an indication of how the Fund will perform in the future.


  • Francis Chou’s Top Holdings at Year End

    Francis Chou (Trades, Portfolio) is one of the international gurus followed by GuruFocus, and is the President of the Toronto-based Chou Associates Management. The guru immigrated to Canada from India in 1976 and is oftentimes praised and acknowledged for his rags to riches story.

    According to the company’s website, the investment process that the Chou funds operate off of is the value-oriented approach to investing. The fund continues to do intricate research which involves a “detailed analysis of the strengths of individual companies, with much less emphasis on short-term market factors.” The portfolio managers at Chou Associates focus primarily on the assessment of a company’s balance sheet, cash flow characteristics, profitability, industry position, special strengths, future growth potential and management ability.


  • 'The first step to getting out of a hole is to stop digging' – A Look at the Performance of Canadian Guru Francis Chou

    Be aware of the risks involved, including that of the manager who does not have a long history of investing heavily in that area.  Caveat emptor!

    -Francis Chou (Trades, Portfolio)


  • Francis Chou Buys Sears Canada, Adds to Prem Watsa's Resolute Forest and MEGA Brands

    Founder of Toronto-based Chou Associates Management Francis Chou is a celebrated value investor whose philosophy rests on rigorous analysis of each company’s “balance sheet, cash flow characteristics, profitability, industry positions, special strengths, future growth potential and management ability.” The more a stock appears undervalued as calculated with the above data, the more of his fund he allocates to it, and margin of safety is paramount. For instance, he bought a sizable position in computer-maker Dell (DELL) when it fell out of favor in the latter half of 2012.

    Chou is also a fan of Berkshire Hathaway (BRK.A)(BRK.B), Resolute Forest Products Inc. (TSX:RFP) and Inc. (OSTK), which along with Dell hold the top four places in his funds.  

  • Francis Chou Comments on Actavis Inc.

    Another big winner was Actavis Inc. (ACT), formerly Watson Pharmaceutical. We first purchased Actavis in 2006 at $25. We kept buying the shares in 2007, and on June 30, 2013, it was priced at $126.22. It shows that when you are accurate in your estimation of intrinsic value and buy them at a significant discount, add in good management and respectable growth in intrinsic value, the investment works out really well. This is true even if you bought them when the market indices were trading at an all-time high. "Value traps" generally occur when you are wrong in your estimation of intrinsic value, pay too much and the company's intrinsic value is static and/or decreasing in value.

    From Francis Chou's semi-annual report 2013.  

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