Francis Chou

Francis Chou

Last Update: 2014-11-13
Related: Chou RRSP Fund

Number of Stocks: 25
Number of New Stocks: 1

Total Value: $395 Mil
Q/Q Turnover: 4%

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

Francis Chou' s Profile & Performance


Francis Chou, the fund manager of Chou America Mutual Funds, has been managing the Chou Funds in Canada since 1986.

Francis Chou's experience is an amazing success story of value investing. He came to Canada in 1976 at age 20 with $200 in his pocket. Without a college degree, he could only work on blue collar jobs. Finally he landed a job at Bell Canada as a telephone repairman. Somehow he was introduced to the books of Benjamin Graham. As written by Warren Buffett in his famous article, The Superinvestors of Graham-and--Doddsville, "It is extraordinary to me that the idea of buying dollar bills for 40 cents takes immediately to people or it doesn't take at all." The idea apparently took Francis Chou immediately.

In 1981, together with six of his fellow telephone repairmen, Francis Chou started an investment club with $51,000. He left Bell Canada in 1984 and became a retail analyst at GW Asset Management, where he met Prem Watsa, the great future Fairfax CEO. He turned the investment club into Chou Associates Fund in 1986.

The rest is history. If you had invested $10,000 in 1986, when Chou Associate Fund started to operate, that $10,000 would be worth $136,916 as of Dec. 31, 2010. During the 24 years of the fund's history, he had only five down years. Over the past 15 years, Chou Associate Fund average gained 13.6%, while the S&P 500 gained just 6.8% a year.

When asked about what the most important things are for him in investing, he said: "Buy bargains. Get the returns slowly. Think independently. Don't be afraid of what other people are saying."

This is exactly what he has done. In the 1990s, during the height of the tech bubble, Francis Chou wrote to his shareholders that he had "no concrete idea of where to proceed from here." He said the market at that time was a fool's game where investors were buying stocks trading at 100 times revenues in the hope of being able to to sell them for 200 times revenues a week later. His fund was down in 1999.

As the stock market made its first crash from 2000 through 2002, Chou Associate Fund gained 71%. By 2006, his fund gained 160% while the broad market just barely broke even from its high at the beginning of 2000.

Web Page:

Investing Philosophy

"The investment process followed in selecting equity investments for the Funds is a value-oriented approach to investing. This involves a detailed analysis of the strengths of individual companies, with much less emphasis on short-term market factors. Far greater importance is placed upon an assessment of a company's balance sheet, cash flow characteristics, profitability, industry position, special strengths, future growth potential and management ability."

Total Holding History

Performance of Chou Associates Fund

YearReturn (%)S&P500 (%)Excess Gain (%)
3-Year Cumulative49.1 (14.2%/year)55 (15.7%/year)-5.9 (-1.5%/year)
5-Year Cumulative130.5 (18.2%/year)125.5 (17.7%/year)5 (0.5%/year)
10-Year Cumulative115.4 (8%/year)104.1 (7.4%/year)11.3 (0.6%/year)
15-Year Cumulative244.9 (8.6%/year)98.3 (4.7%/year)146.6 (3.9%/year)
20-Year Cumulative833.8 (11.8%/year)483.2 (9.2%/year)350.6 (2.6%/year)
25-Year Cumulative1601.3 (12%/year)1050.7 (10.3%/year)550.6 (1.7%/year)

Top Ranked Articles

Francis Chou:The Investment Guru That You've Never Heard Of; Comments on ABH, WPI, BAC, BRK.A
No college degree. No connection. No formal education in finance or business. Living at a place far from Wall Street. Just one assistant in the office. But still achieved an amazing long-term track record and manages more than $1 billion. No, we are not talking about Walter Schloss. Read more...
Prem Watsa – Highlights from “Fair and Friendly : The First 25 Years of Fairfax”
One of GuruFocus readers sent us a book published by Fairfax, the Canadian insurance company founded by Prem Watsa. In case you missed this, we have recently interviewed Mr. Watsa. In the interview Mr. Watsa shared his philosophy in running Fairfax, his view on economy, Europe, and his holdings in Bank of Ireland (IRE), Research-in-Motion (RIMM) and Dell (DELL). You can read the transcript here. Read more...
Francis Chou 2nd Quarter Letter and Holdings
Francis Chou who manages the Chou Funds is a true Benjamin Graham type investor. An uglier looking portfolio you will never find. Ugly, but successful: Read more...
Francis Chou Buys Citigroup Inc., Bank Of America Warrants, Sears, Goldman Sachs
Canada based value investor Francis Chou just reported his third quarter portfolio. Chou follows the classic Ben Graham’s approach of value investing, and has achieved great long term track record. To understand more how Francis Chou invests, please read our featured article, Francis Chou – The Investment Guru That You Never Heard Of. Read more...
The Value of Vodafone
Here's an idea for the June contest: Vodafone (VOD). Read more...
» More Francis Chou Articles

Commentaries and Stories

  • Currently 4.92/5

Rating: 4.9/5 (12 votes)

Guru Francis Chou Answers Readers' Questions Francis Chou - 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. More...

Francis Chou, Interview, Q&A

  • Currently 5.00/5

Rating: 5.0/5 (3 votes)

Ask Your Investment Questions to Guru Francis Chou Francis Chou - Ask Your Investment Questions To Guru Francis Chou
Francis Chou (Trades, Portfolio), fund manager of Chou Mutual Funds, has agreed to answer questions from GuruFocus’ readers. We plan to compile a list of questions and submit them to him a week from now. This is a golden opportunity for you to ask him questions about investing. More...

Francis Chou, Interview, Q&A, Prem Watsa

  • Currently 3.67/5

Rating: 3.7/5 (3 votes)

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

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Rating: 0.0/5 (0 votes)

Francis Chou Funds - Buys and Sells of Second Quarter Francis Chou,Chou RRSP Fund - 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. More...

  • Currently 5.00/5

Rating: 5.0/5 (1 vote)

Global Market Valuations and Expected Returns – April 4, 2014 Daniel Loeb,Francis Chou - 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. More...

  • Currently 4.75/5

Rating: 4.8/5 (4 votes)

Chou Funds Triples Investment in BlackBerry, Adds New Stock to Portfolio Francis Chou - 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. More...

  • Currently 5.00/5

Rating: 5.0/5 (1 vote)

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. More...

  • Currently 5.00/5

Rating: 5.0/5 (2 votes)

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 More...

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Rating: 5.0/5 (2 votes)

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. More...

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Rating: 0.0/5 (0 votes)

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. More...

  • Currently 4.50/5

Rating: 4.5/5 (2 votes)

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. More...

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Rating: 0.0/5 (0 votes)

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. More...

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Rating: 5.0/5 (1 vote)

Canadian Guru Francis Chou's Annual Letter - He Believes Sears Holdings Offers Misunderstood Value
Dear Shareholder, More...

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Rating: 5.0/5 (4 votes)

Francis Chou’s Top Holdings at Year End Francis Chou - 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. More...

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Rating: 3.0/5 (4 votes)

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

  • Currently 4.08/5

Rating: 4.1/5 (13 votes)

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

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Rating: 2.7/5 (3 votes)

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. More...

  • Currently 4.67/5

Rating: 4.7/5 (6 votes)

Francis Chou Comments on (OSTK) was the largest contributor to the positive performance of the Fund. The stock increased in value to $28.20 as at June 30, 2013, up from $13.95 as at December 31, 2012. It is interesting to note that a year ago, on June 29, 2012, it was trading as low as $6.91 per share. Generally, when prices hit a new low, our reaction is to check whether our evaluation of the company's intrinsic value is accurate enough. If it is accurate enough, we either sit put or buy more. Since we already had a fair amount of OSTK in the portfolio, we did not add any more but were comfortable with our investment in the company. There are many ways of evaluating a company and one of them is to check recent transactions within its industry which may provide a sense of its intrinsic value. For example, in 2009 Amazon bought Zappos, a company that is similar to OSTK but different in many ways, at close to one times revenue. At one times revenue, OSTK's intrinsic value is more than $40 per share whereas its stock price closed on December 31, 2012 at $13.95 per share. One important caveat: This type of comparison is fraught with danger and should be viewed as just a frame of reference. At the More...

  • Currently 3.60/5

Rating: 3.6/5 (5 votes)

Real-Time Rodeo and Round Up - Reduction Trades
The month of May is when rodeo season heats up around the U.S. and cowboys, just like investors, prove their timing, finesse and skill in riding something risky and unpredictable. A review of the GuruFocus "Real Time Picks" report shows the month of May was a virtual rodeo of reductions made by the world’s top investors. Let’s round up the riders and the horses for a real-time reduction rodeo: More...


  • Currently 4.13/5

Rating: 4.1/5 (8 votes)

Francis Chou Drastic Cut - Overstock Up 237% Over 12 Months
As of April 23, 2013, Francis Chou, fund manager of Chou America Mutual Funds, reduced his position in (OSTK) by 12.25%, with current shares after the trade at 1,891,587. Chou sold in the price range of $18.91 per share, for a 1.48% loss to his portfolio. OSTK’s current price is $1.75 with a change from average up 4%. This is Chou’s second reduction so far this year, and his fifth chop since last fall when the share price was around $15.5, according to GuruFocus Real Time Picks. More...


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