Deep-value investor Francis Chou (Trades, Portfolio), founder of Chou Funds, disclosed his equity portfolio for the first quarter earlier this month.
The guru’s Toronto-based firm’s value-oriented approach to stock picking involves a detailed analysis of a company’s strengths, focusing on its balance sheet, cash flow characteristics, profitability, industry position, competitive advantages, future growth potential and quality of the management team. On its website, the firm notes much less emphasis is placed on short-term market factors that could temporarily be crippling the stock.
Based on these criteria, 13F filings show the firm established a new position in Navient Corp. (NAVI, Financial) and added to its Synchrony Financial (SYF, Financial) holding. Further, it sold out of CI Financial Corp. (CIXXF, Financial), while the Resolute Forest Products Inc. (RFP, Financial) investment was dissolved following an acquisition.
Investors should be aware 13F filings do not give a complete picture of a firm’s holdings as the reports only include its positions in U.S. stocks and American depository receipts, but they can still provide valuable information. Further, the reports only reflect trades and holdings as of the most-recent portfolio filing date, which may or may not be held by the reporting firm today or even when this article was published.
Navient
Chou invested in 183,338 shares of Navient (NAVI, Financial), allocating 4.09% of the equity portfolio to the position. The stock traded for an average price of $17.45 per share during the quarter.
It is now his sixth-largest holding.
The Wilmington, Delaware-based financial services company has a $1.93 billion market cap; its shares were trading around $15.28 on Friday with a price-earnings ratio of 4.23, a price-book ratio of 0.66 and a price-sales ratio of 1.40.
The GF Value Line suggests the stock is fairly valued currently based on its historical ratios, past financial performance and analysts’ future earnings projections.
At 69 out of 100, the GF Score indicates the company has poor performance potential. While it received a high rating for momentum, the profitability and growth ranks were more moderate and the value and financial strength ranks were low.
Of the gurus invested in Navient, Donald Smith & Co. has the largest stake with 0.79% of its outstanding shares. Hotchkis & Wiley, Jim Simons (Trades, Portfolio)’ Renaissance Technologies, Caxton Associates (Trades, Portfolio), Kahn Brothers (Trades, Portfolio), Steven Cohen (Trades, Portfolio) and Azvalor Managers FI (Trades, Portfolio) also have positions in the stock.
Synchrony Financial
The guru upped his Synchrony Financial (SYF, Financial) holding by 106.90%, picking up 62,000 shares. The transaction had an impact of 2.52% on the equity portfolio. Shares traded for an average price of $33.58 each during the quarter.
Chou now holds 120,000 shares total, which occupy 4.87% of the equity portfolio as the fifth-largest holding. GuruFocus estimates he has lost 11.51% on the investment so far.
The financial services company headquartered in Stamford, Connecticut has a market cap of $13.11 billion; its shares were trading around $30.59 on Friday with a price-earnings ratio of 5.39, a price-book ratio of 1.05 and a price-sales ratio of 1.21.
According to the GF Value Line, the stock is significantly undervalued currently.
The GF Score of 81 implies the company has good outperformance potential on the back of high ratings for growth, value and momentum and more moderate profitability and financial strength ranks.
With a 0.28% stake, Jeremy Grantham (Trades, Portfolio) is Synchrony’s largest guru shareholder. Other guru investors include Simons’ firm, the CI Select Canadian Equity Fund (Trades, Portfolio), Cohen, Caxton Associates (Trades, Portfolio) and Joel Greenblatt (Trades, Portfolio).
CI Financial
The investor exited his 28,700-share investment in CI Financial (CIXXF, Financial), impacting the equity portfolio by -0.40%. During the quarter, the stock traded for an average per-share price of $11.
GuruFocus data shows Chou gained 9.02% on the short-lived investment.
The Canadian invest management company, which voluntarily delisted from the New York Stock Exchange in January, has a $1.78 billion market cap; its shares were trading around $9.62 on Friday with a price-earnings ratio of 5.56, a price-book ratio of 1.44 and a price-sales ratio of 0.84.
Based on the GF Value Line, the stock appears to be a possible value trap currently. As such, potential investors should do thorough research before making a decision.
The GF Score of 91 means the company has high outperformance potential, driven by high ratings for profitability, growth and momentum as well as more moderate financial strength and value ranks.
No other gurus currently own the stock.
Resolute Forest Products
The 261,460-share holding in Resolute Forest Products (RFP, Financial) was also dissolved due to the company being acquired by Paper Excellence in early March. The transaction had an impact of -7.98% on the equity portfolio. During the quarter, shares of the Canadian paper manufacturer traded for an average price of $21.59 each.
According to GuruFocus, Chou gained an estimated 0.22% on the investment over its lifetime. It was previously his second-largest position.
Portfolio composition
Chou did not make any other changes.
The guru’s $72 million equity portfolio, which is made up of 17 stocks, is heavily invested in the financial services sector at 73.84%.
