investmd Posted August 30, 2017 Share Posted August 30, 2017 Francis Chou's semi-annual letter is out http://choufunds.com/pdf/SEMI-AR%202017%20vF%20%28with%20cover%29.pdf Review of holdings shows ability to analyze companies and buy them at deep value with numerous "winners" up > 3x (BRK, Nokia, Citi, JPM Warrants and Wells Fargo Warrants). However, the same thoughtful, erudite, value investing analytic pathway resulted in losses of >50% in Valeant & Resolute Forest Products, with Sears being down >80%! End result is 10 yr returns of 4.3%/yr and 15yr returns of 6.6%. Without a couple of the big losses, his fund would be hitting it out of the park. Is there something that Chou can (vs. will) do to avoid these huge losses? I see no evidence of change in "style" . Finally I don't agree with his "math" that 10 & 15 year returns can be skewed by one bad year and that's just the way it is. He's mentioned this before and I'm surprised to see him bring it up again. One expects there to be some bad years and some very good years. However, over any period of time, it should average out. Ten years is a good period of time. Link to comment Share on other sites More sharing options...
ourkid8 Posted August 30, 2017 Share Posted August 30, 2017 I am a unit holder in his fund and it has been a terrible investment. At least Francis acknowledges his mistakes in stock selections. In conclusion, we do not believe that we have entered a new paradigm; there is definite room for improvement in stock selections but the principle of value investing is sound and, in time the logic will prevail in the end. Francis Chou's semi-annual letter is out http://choufunds.com/pdf/SEMI-AR%202017%20vF%20%28with%20cover%29.pdf Review of holdings shows ability to analyze companies and buy them at deep value with numerous "winners" up > 3x (BRK, Nokia, Citi, JPM Warrants and Wells Fargo Warrants). However, the same thoughtful, erudite, value investing analytic pathway resulted in losses of >50% in Valeant & Resolute Forest Products, with Sears being down >80%! End result is 10 yr returns of 4.3%/yr and 15yr returns of 6.6%. Without a couple of the big losses, his fund would be hitting it out of the park. Is there something that Chou can (vs. will) do to avoid these huge losses? I see no evidence of change in "style" . Finally I don't agree with his "math" that 10 & 15 year returns can be skewed by one bad year and that's just the way it is. He's mentioned this before and I'm surprised to see him bring it up again. One expects there to be some bad years and some very good years. However, over any period of time, it should average out. Ten years is a good period of time. Link to comment Share on other sites More sharing options...
Guest Posted August 30, 2017 Share Posted August 30, 2017 Buying his Chou Opportunity fund was one of the worst investments I've made. After a terrible stretch, I decided to add more (contrarianism...doesn't always pay off). I still wonder about it. If you look at the history he went many, many, many years underperforming the market...until he didn't. I'm hoping he'll do it again. Can't say I'm buying anymore but haven't sold any lately either. Link to comment Share on other sites More sharing options...
TorontoRaptorsFan Posted August 30, 2017 Share Posted August 30, 2017 He should just hold a bunch of blue chip stocks like JPM, BAC, C, BRK-A/B, BAM, etc...etc...sort of be like Davis, Weitz, etc. Link to comment Share on other sites More sharing options...
investmd Posted August 31, 2017 Author Share Posted August 31, 2017 Ourkid8 & stahleyp, I'm in the exact same boat. I have held a large position with Chou for a decade. Long history of underperforming, but one knows that he has the knowledge and skill set to excel - IF - he can avoid the losses. Was adding more during downturns (being a contrarian) but I stopped adding 2-3 years ago and have been holding/waiting for the thesis to play out. V. frustrating. Link to comment Share on other sites More sharing options...
petec Posted August 31, 2017 Share Posted August 31, 2017 Does anyone recognise his description of pharma stocks being on 10x earnings? They look like they're on nearer 20x to me. Link to comment Share on other sites More sharing options...
Txvestor Posted August 31, 2017 Share Posted August 31, 2017 He just had another dud with Teva recently. Link to comment Share on other sites More sharing options...
bookie71 Posted August 31, 2017 Share Posted August 31, 2017 I too had a position for quite a few years and finally got out. Just because he is a nice guy doesn't make him a great investor. Link to comment Share on other sites More sharing options...
CalvinL Posted August 31, 2017 Share Posted August 31, 2017 I always wonder how he got to the level of fame that he has today. I have to say he is a respectable guy in terms of integrity. He even returns management fee at one point due to under performance. He is a nice guy...but that itself doesn't guarantee investment success. He under-performed the market and made several big mistakes along the way. he came to our class once and talked about value investing. That was a good lecture and I think he understands value investing...but like a great UFC trainer, they don't always win in UFC ring. Link to comment Share on other sites More sharing options...
Cigarbutt Posted August 31, 2017 Share Posted August 31, 2017 I really respect Mr. Chou and have followed what he has written, bought and sold. However 5 and 10 year periods are sufficiently long to evaluate performance and smooth statistical fluke. The tide may change but survival is about adaptation. I submit though that the oration being spelled out may be too severe as it reminds me of the death of equities mentioned in some 1970's headlines. Value investing is not dead. The best days are ahead. Past performance is not indicative of future returns and I suggest that Mr. Chou's returns will be relatively better. Link to comment Share on other sites More sharing options...
investmd Posted September 1, 2017 Author Share Posted September 1, 2017 Well said again Cigarbutt. The fact that Mr. Chou has the intellect and understanding to make such brilliant bets but also lose badly on many others has been an eye-opener to me. Although I haven't seen any evidence, hopefully, he has been able to incorporate into his practice a few danger signs that will allow him to steer away from the big losses. That will result in your prediction of his returns being relatively better in the future. After 10 years am trying hard to continue to believe in his thought process and hold on. Link to comment Share on other sites More sharing options...
Guest Posted September 1, 2017 Share Posted September 1, 2017 Maybe I'm naive, but I do think the best days of valuing investing are behind it. I think it'll still outperform long term but not the same extent. There are a lot of products now that focus on the "value factor" and taken some of the strength out of it. Link to comment Share on other sites More sharing options...
Cigarbutt Posted September 1, 2017 Share Posted September 1, 2017 Fair enough. The competitive landscape may change. But, it could go both ways. Disclosure: biased with cycles and reversion to the mean mentality. Link to comment Share on other sites More sharing options...
Cigarbutt Posted September 1, 2017 Share Posted September 1, 2017 Came across this. https://www.advisorperspectives.com/articles/2016/02/01/now-is-the-time-for-value-to-outperform-growth Includes this quote from Mr. Steve Jobs: "I'm convinced that about half of what separates the successful entrepreneurs from the non-successful ones is pure perseverance." Perseverance or stubbornness? Grey area. Link to comment Share on other sites More sharing options...
Guest Posted September 1, 2017 Share Posted September 1, 2017 Good grief. Chou Opportunity was hit hard today. I thought it was a dividend or capital gain but not looking like it. Link to comment Share on other sites More sharing options...
wondering Posted August 31, 2018 Share Posted August 31, 2018 Chou 2018 Semi-annual report is out http://choufunds.com/pdf/SEMI-AR%202018.pdf Link to comment Share on other sites More sharing options...
OracleofCarolina Posted August 31, 2018 Share Posted August 31, 2018 interesting tidbit...sheesh, Chou and Berkowitz reaklly took it on the chin by sticking with SHLD Sears Holdings In hindsight, our initial assessment of Sears Holdings being worth more than $50 per share a few years ago was most likely too optimistic. This is taking into consideration that we received in excess of $23 per share in distributions from various spin-offs and right offerings, which we later sold in the market. In 2017, we initiated a stock lending program where the Fund received interest on the shares lent. For Sears Holdings, the total security lending interest we received for the year was about $7.25 million or about $6.41 per share, all in U.S. dollars. This shows how heavily shorted the common shares of Sears Holdings have been. For the six-month period ending on June 30, 2018, the total security lending interest received was $483,596 or about $0.43 per share, all in U.S. dollars. In spite of the interest income earned from security lending, plus the approximately $23 per share received in distributions from various spin-offs and rights offerings, it has not been a good investment. Link to comment Share on other sites More sharing options...
Guest Posted September 1, 2018 Share Posted September 1, 2018 Why did he not do the lending on SHLD prior to 2017? Link to comment Share on other sites More sharing options...
investmd Posted September 2, 2018 Author Share Posted September 2, 2018 This thread was started a year ago in view of poor 10 year results and surprising lack of vision as to improve process going forward. A year later, it's the same letter basically says that picking on last 10 years doesn't have merit and that investment decision process could improve but no insight to what changes could be made. Disappointing that he hasn't given investors anymore insight. Link to comment Share on other sites More sharing options...
Rod Posted September 2, 2018 Share Posted September 2, 2018 This thread was started a year ago in view of poor 10 year results and surprising lack of vision as to improve process going forward. A year later, it's the same letter basically says that picking on last 10 years doesn't have merit and that investment decision process could improve but no insight to what changes could be made. Disappointing that he hasn't given investors anymore insight. Looking at the Chou RRSP fund, I notice that even though the portfolio is very concentrated, several of his investments are down around 90%. Clearly these were bad bets. Yet the commentary mostly ignores this and blames poor performance on the market not respecting value. I would think some admission of mistakes is in order here. Link to comment Share on other sites More sharing options...
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