|Francis Chou Q&A
|"The Center for the Advancement of Value Investing Education (CAVIE)'s 2021 Virtual Seminar on Value Investing and the Search for Value welcomed Francis Chou as a Guest Speaker. Mr. Chou is the Founder and President of Chou Associates Management"
|"In summary, although the markets have been less kind to value investing, we exacerbated the problemas practitioners." [pdf]
|Chou's annual letter
|"Similar to the current index mania, these 50 well-established growth stocks were considered buys at any price, sending them to levels that were unjustified on the basis of intrinsic value. The delusion was short - lived as they collapsed shortly after in the 1970s. As one Forbes columnist described it, 'the Nifty Fifty were taken out and shot one by one.'"
|"we believe pharmaceutical stocks as a group are selling at attractive valuations, in comparison to the free cash flow and earnings they generate. The recent price drops may present one or more attractive long-term investment opportunities"
|Chou's Annual Letter
|"Based on the information we now have, the average price we paid of less than seven times free cash flow is on the high side, but at less than two times free cash flow it is a totally different story. If these numbers hold, we believe that the intrinsic value is much higher than the current price of Valeant."
|Francis Chou profile
|"At the moment, no sector stands out in terms of valuation - it's all expensive, he says - but he's being patient."
|"We are alarmed by the torrent of negative-yield bonds issued by European and Japanese central banks. We believe that more than $10 trillion of such bonds have been issued globally to date. Investors have been gobbling them up as if there is no tomorrow. They are not aware of the enormous risks they are taking here. Even a modest increase in interest rates will culminate to an unmitigated disaster. Please stay clear of such bonds. We wouldn't touch it with a barge pole - let alone a 10-foot pole"
|Chou annual for Canadians
|"In 1981, I felt the economic conditions were such that you were set up for a huge success. You just needed the courage to load up the truck and buy everything in sight. By contrast current conditions make me feel that investors are being set up for a heartbreaking disappointment, especially for the unwary."
|Chou America Annual
|"We believe that CDS are starting to sell at prices that are becoming interesting. At recent prices, they appear to offer one of the potentially cheapest forms of insurance against market disruptions. We are continuing to monitor CDS prices and may potentially invest in CDS in the future."
|Chou runs his fund the way he runs his life
|"At lunch Francis lamented that "I've become a bond trader." He finds it is very time-consuming because "there is a lot of haggling that goes on." His days are now filled with calls from bond dealers who know that Francis is an interested buyer. He is on everyone's speed dial. In the 2002 Chou Fund report, Francis said "distressed securities involve companies that have one or more serious deficiencies including weak economics, stretched balance sheets, liquidity problems, incompetent management, accounting frauds, potentially mutant cockroaches - you name it.""
|Is value dead?
|"The cookie-cutter office building stacked amid high-rise condos and streetside retail is not where you'd expect to find the man who oversees $1.2 billion in funds, and who is said to be Canada's top stock-market bargain hunter. Taped to his door is a plain piece of paper that has been run through a printer: "Chou Associates Management Inc.," it reads, implying that nothing of much importance is happening here. The door is locked, but jiggle the handle of the door and out pops Francis Chou, whom I have come to ask about the strange decline in the once-dominant school of value investing. It's an investing style once described by the late, great value guru Benjamin Graham as the equivalent of rifling through a store's discount bin. In other words, if you are patient enough to search endlessly and smart enough to know the difference between a true bargain and a bad knockoff, then you can make terrific money."
|Chou's annual report for 2007
|"We are long term investors and, in general, our bias has been to concentrate on stock selections and not worry about currency fluctuations. With years like 2007, the question arises as to whether there have been major disparities in annualized returns over the long term between a hedged portfolio and an unhedged portfolio; in other words, does one offer more advantageous performance results during currency fluctuations? Two studies, one covering the period from 1975 through 1988 and the other from 1988 through 2003, confirm that with respect to the long term there have been no material differences in returns."
|How value investor Chou wins with bonds
|"When you read about investment stars, portfolio managers who score high double digit and even triple digit annual gains, managers of bond portfolios usually aren't there. The reason - bonds are a different game, one where risk is less courted than avoided. But when the dust settles after big market busts, it's often the bond managers who are still standing. Francis Chou, 52, of Chou Associates Management Inc., is one of those survivors. His $90-million Chou Bond Fund (US$), established in the fall of 2005, soared to the No. 1 spot among 65 funds in the high yield sector with an average annual compound gain of 10.4 per cent for the two years ended Feb. 29, 2008, far above the 1.5 per cent average annual compound gain of peers in the period."
|2007 Chou Lecture
|"Mr. Chou has operated two of the country's most successful funds, Chou Associates Fund and Chou RRSP fund, for the last 18 years."
|2006 Chou Lecture
|"While working as a technician for a phone company in 1981, he started an investment club that would later become the Associates fund. Mr. Chou has operated two of the country.s most successful funds, Chou Associates Fund and Chou RRSP fund, for the last 18 years."
|Chou annual 2006
|"it appears obvious that investors are throwing caution to the wind. Risk is not priced into riskier securities at all. Whenever the majority of investors are purchasing securities at prices that implicitly assume that everything is perfect with the world, an economic dislocation or other shock always seems to appear out of the blue. And when that happens, investors learn, once again, that they ignore risk at their peril."
|He chooses the best of the bargain bin
|"Success and a tidy personal fortune have come to Mr. Chou through a remarkable odyssey. Born in India, he immigrated to Canada in 1976, got a job as a telephone repair man for Bell Canada and worked for seven years, during which time he discovered the legendary Ben Graham, co-author, with David Dodd, of Security Analysis, the book that established value investing as a discipline. Mr. Chou, who had only his Grade 12 under his belt, and half a dozen co-workers chipped into a pool that totalled $51,000 and created the fund that became Chou Associates. Each dollar invested at the start in July, 1981, has become $38, Mr. Chou said. The original investment club was converted to a mutual fund in 1986 and, over the next 20 years, the fund has produced an average annual compound gain of 14.09 per cent, making it one of the top four mutual funds among the 216 with 20-year records."
|Words of wisdom
|"Last month, the 2004 Annual Report of the Chou Funds showed up in my e-mail box and I wasted no time in reading his current views on investing. As usual, they were thoughtful, practical, and on-target."
|"In general, we have done well with retail companies such as BMTC Group. But with retailing and restaurant companies it is difficult to get a handle on how the future will pan out, regardless of how well they may have done in the past. Retailing concepts that work well can be easily duplicated by competitors. Also, if consumer tastes change, the retailing companies are faced with serious financial and operational issues. Liabilities such as operating and capitalized leases suddenly become real short-term debt, much needed cash is used up in severance and closure costs, and a host of other problems crop up. In short, these consequences can quickly put a financially sound retailer into a serious short-term liquidity crisis."
|Francis Chou flies quietly under the industry's radar
|"Chou screens about 2,000 names and looks at basic financial metrics, including price/earnings and price/book ratios and strong balance sheets. He may find 20 to 30 names that he deems "worth looking at." He then looks for opportunities in which firms are 40%-50% undervalued."
|Chou named fund manager of the decade
|"Chou, the manager of several top-performing mutual funds received major recognition at the Awards for the second straight year. Chou RRSP Fund had a 10-year compound annual return of 17.3% at Oct. 31, compared with 7.8% for the Morningstar Canadian Equity Mutual Fund Index."
|Chou's straight talk
|"On plain white paper, Mr. Chou gives you straight, unvarnished talk about his results, the markets and the business of running a fund. By comparison, most standard fund industry annual reports have the feel and depth of insight you usually see in new car brochures."