Canadian value guru Francis Chou joined his friend Prem Watsa in the bet RIMM and Dell (DELL), according to the latest filings of Chou Funds. Francis Chou bought 200,000 shares of RIMM at the average prices of $7. He also bought another beaten down tech stock Dell at about $11.5 a share. He sold out his position in USG, and reduced holdings in Watson Pharmaceuticals Inc., Sprint Nextel Corp, Gap, Inc., Overstock.com, Inc., etc.
As we reported back in July, Prem Watsa Doubled Down on Research-In-Motion, Again. Prem Watsa has incurred large losses with RIMM. He started buying when the stock crashed from $140 a share to $50 a share. He kept adding to the position, but the stock prices continue to decline. His latest purchases are in July, in which he doubled down again and lowered his cost per share to about $17 a share. Prem Watsa is still having a more than 50% paper loss with RIMM.
According to the notes at Fairfax Financial Dinner, Prem reviewed the firm (Research-in-Motion) calling it a great Canadian success, noting that it remains #1 in many markets, and observing that is has $2.1 billion in cash and no debt. It has, however, fallen by about 90% which Prem correctly notes makes people think that it's doomed while its competitor Apple seems destined to shoot to the moon. However, as value investors know, nothing grows to the sky [and even the meanest dog can have his day]. Francis Chou also thinks that RIMM patents alone are worth over $13 a share.
In GuruFocus interview with Prem Watsa, he indicated that the reason he respects the company founders extremely. He said: we bought Dell (DELL) when Michael Dell came back. Here's a company that went from 0 to $60 billion in revenue, and tons of hurdles he had to overcome with his management team, and we just figure that the guy who's done that, and still is a significant shareholder, so focused, will figure his or her way out. Of course the valuation is cheap, all of that, but we're very focused on management, and the founder of the company who's had such a wonderful track record, not that they're infallible, but we would bet on them. Particularly right now for RIMM, getting new management would be a disaster, would be the biggest mistake that the board would make.
His cost per share with Dell is at around $15 a share. He has since reduced his holdings in Dell. Today Dell is traded at $9.55.
Both Francis Chou and Prem Watsa are Ben Graham types of deep value investors. They like business cheap.
As of 09/30/2012, Chou Associates Management owns 31 stocks with a total value of $350 million. These are the details of the buys and sells.
This is the sector weightings of his portfolio:
|Oil & Gas||0.1%|
These are the top 5 holdings of Francis Chou
- Berkshire Hathaway Inc (BRK.A) - 300 shares, 11.4% of the total portfolio.
- Resolute Forest Products Inc (RFP) - 3,062,268 shares, 11.4% of the total portfolio.
- Sears Holdings Corporation (SHLD) - 683,700 shares, 10.8% of the total portfolio.
- Watson Pharmaceuticals Inc. (WPI) - 335,400 shares, 8.2% of the total portfolio. Shares reduced by 37.36%
- Overstock.com, Inc. (OSTK) - 2,310,209 shares, 6.8% of the total portfolio.
New Purchase: Dell Inc (DELL)
Francis Chou initiated holdings in Dell Inc. His purchase prices were between $9.85 and $12.68, with an estimated average price of $11.55. The impact to his portfolio due to this purchase was 4.2%. His holdings were 1,500,000 shares as of 09/30/2012. Dell Inc. is a premier provider of products and services required for customers worldwide to build their information-technology and Internet infrastructures. Dell Inc has a market cap of $16.34 billion; its shares were traded at around $9.55 with a P/E ratio of 4.8 and P/S ratio of 0.3. The dividend yield of Dell Inc stocks is 3.4%. Dell Inc had an annual average earnings growth of 8.1% over the past 10 years. GuruFocus rated Dell Inc the business predictability rank of 3.5-star.
New Purchase: Research In Motion Ltd (RIMM)
Francis Chou initiated holdings in Research In Motion Ltd. His purchase prices were between $6.46 and $8.28, with an estimated average price of $7.22. The impact to his portfolio due to this purchase was 0.43%. His holdings were 200,000 shares as of 09/30/2012. RESEARCH IN MOTION is a world leader in the mobile communications market and has a history of developing breakthrough wireless solutions. Research In Motion Ltd has a market cap of $4.48 billion; its shares were traded at around $8.79 with a P/E ratio of 6.8 and P/S ratio of 0.2. Research In Motion Ltd had an annual average earnings growth of 28.5% over the past 5 years.
Sold Out: Usg Corp (NYSE:USG)
Francis Chou sold out his holdings in Usg Corp. His sale prices were between $15.65 and $23.73, with an estimated average price of $19.81. USG Corp., through its subsidiaries, is a manufacturer and distributor of building materials producing a wide range of products for use in new residential, new nonresidential and repair and remodel construction, as well as products used in certain industrial processes. Usg Corp has a market cap of $2.8 billion; its shares were traded at around $24.08 with and P/S ratio of 0.9.
Here is the complete portfolio of Francis Chou. Also check out:
1. Francis Chou's Undervalued Stocks
2. Francis Chou's Top Growth Companies, and
3. Francis Chou's High Yield stocks