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Canadian Value Investor Francis Chou Buys Abitibibowater, Bank Of America Warrants, Wells Fargo Warrants, Sells Valeant Pharmaceuticals

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gurufocus

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Canadian value investor Francis Chou reported his Q4 portfolio. As of 12/31/2010, Chou Associates Management Inc. owns 30 stocks with a total value of $510 million. These are the details of the buys and sells.

Chou buys Abitibibowater, Bank Of America Warrants, Wells Fargo & Co. Warrants Expiring 10/28/18, Mannkind Corp., sells Valeant Pharmaceuticals International during the 3-months ended 12/31/2010, according to the most recent filings of his investment company, Chou Associates Management Inc.

According to an article by Greg Speicher, Chou invests using three different tactics:

First, he keeps his eyes peeled for what he calls “special situations” — companies facing short-term problems that result in temporary mispricings under unusual circumstances.

Second, he likes to buy shares in what he jokingly refers to as CRAP (Cannot Realize A Profit) companies. Chou says the market is prone to overreacting when stocks are heading for the toilet, so failing companies are often irrationally valued for less than they would be worth if they liquidated their assets. He buys baskets of such companies, knowing that he may lose money on three out of 10, but more than make up for those losses with profits on the other seven.

His final tactic is more akin to the way that [url=http://www.gurufocus.com/StockBuy.php?GuruName=Warren+Buffett]Warren Buffett[/url] invests and it’s increasingly Chou’s favorite. It entails spending countless hours searching for well-run companies with growth potential that, for some reason, are trading for much less than they’re worth. Because the market is so efficient, such companies are extremely rare and often only found among those with short-term problems, but they offer excellent long-term prospects if they’re blessed with strong management. Chou is lucky to find one or two during a whole year of searching. But once he’s found one, Chou doesn’t hesitate to bet 5% or more of his portfolio on that single stock. “When you know you’re buying a good company, it’s like getting a straight flush,” he says. “They’re hard to find, so when you’ve got one, you have to capitalize on it.”

This is the portfolio chart of Francis Chou. You can click on the legend of the chart to show/hide buys, sells, or holdings. Each ball on the chart represents a position in the portfolio. You can move your mouse on the balls to see the details of each position and click to see the details of all guru trades with this position.



For the details of Francis Chou's stock buys and sells, go to http://www.gurufocus.com/StockBuy.php?GuruName=Francis+Chou

This is the sector weightings of his portfolio:

Health Care 45.2%
Consumer Services 14.6%
Financials 8.2%
Telecommunications 6.6%
Basic Materials 3.6%
Technology 0.6%
Oil & Gas 0.1%


These are the top 5 holdings of Francis Chou

  1. KING PHARMACEUTICALS (KG) - 6,025,300 shares, 16.6% of the total portfolio. Shares reduced by 10.44%
  2. ABITIBIBOWATER (ABH) - 2,380,478 shares, 11.05% of the total portfolio. Shares added by 10000%
  3. Overstock.com Inc. (OSTK) - 2,219,709 shares, 7.17% of the total portfolio.
  4. WATSON PHARMACEUTICALS (WPI) - 635,400 shares, 6.44% of the total portfolio.
  5. BANK OF AMERICA WARRANTS (BAC.WS.A) - 4,200,000 shares, 5.88% of the total portfolio. Shares added by 10000%


Added: Mannkind Corp. (MNKD)

Francis Chou added to his holdings in Mannkind Corp. by 18.86%. His purchase prices were between $5.4 and $8.52, with an estimated average price of $6.75. The impact to his portfolio due to this purchase was 0.61%. His holdings were 2,438,989 shares as of 12/31/2010.

Mannkind Corporation is a biopharmaceutical company focused on the discovery, development and commercialization of therapeutic products for diseases such as diabetes, cancer, inflammatory and autoimmune diseases. Mannkind Corp. has a market cap of $434.2 million; its shares were traded at around $3.48 with and P/S ratio of 4668.8.

New Purchase: Abitibibowater (ABH)

Francis Chou initiated holdings in Abitibibowater. His purchase prices were between $22.95 and $23.85, with an estimated average price of $23.55. The impact to his portfolio due to this purchase was 11.05%. His holdings were 2,380,478 shares as of 12/31/2010.

AbitibiBowater Inc is engaged in the production of newsprint and coated and specialty papers. Abitibibowater has a market cap of $1.64 billion; its shares were traded at around $30 .

New Purchase: Bank Of America Warrants (BAC.WS.A)

Francis Chou initiated holdings in Bank Of America Warrants. His purchase prices were between $5.84 and $7.54, with an estimated average price of $6.67. The impact to his portfolio due to this purchase was 5.88%. His holdings were 4,200,000 shares as of 12/31/2010.

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New Purchase: Wells Fargo & Co. Warrants Expiring 10/28/18 (WFC.WS)

Francis Chou initiated holdings in Wells Fargo & Co. Warrants Expiring 10/28/18. His purchase prices were between $7.74 and $11.2899, with an estimated average price of $9.22. The impact to his portfolio due to this purchase was 2.17%. His holdings were 997,500 shares as of 12/31/2010.

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Reduced: Valeant Pharmaceuticals International (VRX)

Francis Chou reduced to his holdings in Valeant Pharmaceuticals International by 41.57%. His sale prices were between $24.59 and $30.28, with an estimated average price of $27.13. The impact to his portfolio due to this sale was -3.32%. Francis Chou still held 839,800 shares as of 12/31/2010.

Valeant Pharmaceuticals International, Inc. is a multinational specialty pharmaceutical company that develops, manufactures and markets a broad range of pharmaceutical products primarily in the areas of neurology, dermatology and branded generics. Valeant Pharmaceuticals International has a market cap of $12.34 billion; its shares were traded at around $41.14 with a P/E ratio of 35.5 and P/S ratio of 15. The dividend yield of Valeant Pharmaceuticals International stocks is 0.9%. Valeant Pharmaceuticals International had an annual average earning growth of 10.8% over the past 5 years.

About the author:

gurufocus
GuruFocus - Stock Picks and Market Insight of Gurus

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Comments

AlbertaSunwapta
AlbertaSunwapta - 3 years ago
Prem Watsa's Fairfax Financial and Chou both own Overstock.com.

I've found that it's a stock that must hold a record for the number of unusually personal and negative opinion pieces going against it. (Seems to me it has far, far more commentary against it than it's mediocre to poor performance ever warranted.)

The lawsuits are intriguing.

I don't own it - should I?
paulwitt
Paulwitt premium member - 3 years ago
Second, he likes to buy shares in what he jokingly refers to as CRAP (Cannot Realize A Profit) companies.

I can relate. My portfolio is loaded with CRAP ....LOL

appooj
Appooj - 3 years ago
I believe Prem Watsa and Chou both have been buying Abitibibowater. They both held substantial amt of bonds of this company as it was diving into bankruptcy. the bonds went to almost no value, but have come back up. I was afraid this was going to be a complete loss and a substantial one at that. They must really understand this company to be convinced to buy their stock now.

King Pharmaceutical is a big holding in Chou Associates (16% of portfolio) and was recently bought out. by Pfizer. Thus Chou locks in a profit on this one.

I believe Chou is deep deep value. He admitted in fall of 2008 to "premature accumalation" but his funds have bounced back very nicely. However, Chou Europe remains the "black sheep" of the family (down 6.7%/yr for the past 5 years). Have to believe this fund will eventually (when?) bounce back in a big way.

One concern with the Chou Associates fund that has been brought up previously is that about 18% of it is owned by Prem Watsa's Fairfax Financial. Does anyone know the relationship between Watsa and Chou. Believe Chou used to work for FFH. Circumstances underwhich he left? Notice that none of the Chou funds own FFH?

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