Jump to content

Chou Dhandho StoneTrust


investmd
 Share

Recommended Posts

 

Learned that Pabrai's Dhandho Funds sold StoneTrust Insurance company. Reasons being competitive business, too many rules and misjudged the opportunity. Turns out the buyer of Stone Trust is Francis Chou!

 

Don't know if he bought it as part of Chou Mutual Funds or another organization or privately. Haven't seen any announcement on Chou's website. My understanding was that Chou Funds was required to buy publicly traded securities. Is that correct? If so, Chou Associates would not be purchaser of Stone Trust.

 

Pabrai didn't think the insurance business was a good opportunity compared to other mispriced equities, but Chou - another deep value investor - each of whom respect each other - sees worthwhile potential.

 

Will be very interesting to see how this plays out.

 

 

 

 

 

 

Link to comment
Share on other sites

Guest longinvestor

Interesting, but I believe it was Chou who told Prem way back when, that Buffett's model worth copying was insurance (float). I believe Chou's nudge lead to Prem getting into insurance which later morphed into Fairfax. Time was early 80's. Is this correct?

 

Link to comment
Share on other sites

Francis has been looking to buy a private business for many years, but could not find what he wanted.  I have no idea if this is in line with that objective, but from what I understood, the intention was never to take the business public if acquired.  He planned on using it to acquire other businesses over time...more like a personal holding company...his own personal Fairfax Financial.

 

If he ever does go public, this would be one guy people should definitely invest into as a shareholder.  If he does not go public...well, then you are out of luck!  Cheers!

Link to comment
Share on other sites

Perhaps, but truth be told his recent investment record has not been anything to crow about.

Most certainly a man of the utmost integrity and humility. And certainly pre 10yrs ago had an

enviable track record but of late it has been bad with multiple permanent impairment of capital

investments.

Link to comment
Share on other sites

Thanks to Cigarbutt and Ourkids8 for links.

Still don't understand how it played out. Press release says StoneTrust was bought by Wintaai holdings which is a "unit" of Chou Associates. A google search reveals no info on Wintaai holdings.

 

Agree with the positive sentiments on integrity, humility, strong conviction and likability for Francis Chou. Also agree on the very subpar results of Chou Funds for past 10 years :( - wish Chou would acknowledge the subpar results, share what he has learnt from it, and what he has changed in approach in order to improve results over next 10 years. Instead, he has taken the stance of "it is what it is and stuff happens".

 

Link to comment
Share on other sites

Are you ahead (> 10000) after taxes?

 

I like Chou and have invested (regrettably) into his US fund.

 

For comparison, if someone invested $10,000 into the Chou Opportunity fund in 2010 it would be worth about $13,222. The S&P 500 meanwhile would be worth about $28,901. Ouch.

Link to comment
Share on other sites

Are you ahead (> 10000) after taxes?

 

I like Chou and have invested (regrettably) into his US fund.

 

For comparison, if someone invested $10,000 into the Chou Opportunity fund in 2010 it would be worth about $13,222. The S&P 500 meanwhile would be worth about $28,901. Ouch.

 

This is all pretax. If you factor in taxes the results are even more in favor of the index, I believe, due to additional turnover of Chou. On the bright side, the fund has so many realized losses that things will be sheltered for a while. :P

Link to comment
Share on other sites

If I were an investor in his funds (which have been underperforming over both long & short periods) the last thing I would want is to have the primary Portfolio Manager distracted by taking on an additional business (this Stonetrust biz) and thus diverting more of his time away from research & portfolio management of the Chou Funds.

Link to comment
Share on other sites

If I were an investor in his funds (which have been underperforming over both long & short periods) the last thing I would want is to have the primary Portfolio Manager distracted by taking on an additional business (this Stonetrust biz) and thus diverting more of his time away from research & portfolio management of the Chou Funds.

 

I would be actually thrilled, the less time he spends on doing dumb things with my money the better the performance will be.  8)

Link to comment
Share on other sites

I like Chou and have invested (regrettably) into his US fund.

 

For comparison, if someone invested $10,000 into the Chou Opportunity fund in 2010 it would be worth about $13,222. The S&P 500 meanwhile would be worth about $28,901. Ouch.

 

I share your pain. About 10 years ago I was so taken by Chou's deep value approach and intelligence/insight that I made Chou Funds (Associate, Europe and Asia) a core portfolio position along with FFH & BRK. Added more during the bad years till 2-3 years ago - slow learner  :(

Haven't sold. Waiting for the huge turnaround and massive gains that will make 10 year average look decent again. It's the only mutual fund I hold.

Link to comment
Share on other sites

Slight digression from the main thrust of the post.

Some here explicitly voice some dissatisfaction concerning investment returns and, at the same time, expect sunnier days.

Implicit value investing risk here?

Can you explain why it is felt that Chou funds will outperform going forward apart from random variables?

 

And to tie in with the main thrust, by making the new insurance entity part of the funds, wouldn't that align incentives?

 

Link to comment
Share on other sites

 

Some here explicitly voice some dissatisfaction concerning investment returns and, at the same time, expect sunnier days.

Implicit value investing risk here?

Can you explain why it is felt that Chou funds will outperform going forward apart from random variables?

 

Fair question Cigarbutt. Bought the funds years ago due to Chou's devotion to deep value investing, ability to go against the grain  and understanding of when companies are deeply undervalued - the "cigar butt" approach. His "honesty" and humility (when he halted his management fee due to subpar returns) helped drive the investment. Plus his mutual fund pays out a 0.5% MER vs. the 1.0% that is standard in the Canadian industry. Made it a core position - it's my only mutual fund holding. Over the years, he has been able to pick multi baggers but results have been poor because of significant number of stocks that tanked badly (Valeant, Sears, RFP...) 

 

So your question is at this stage, why do I hold on? Probably a psychological error in that one doesn't want to exit a bad investment, and declare that initial thesis was wrong, and possibly miss out on the always possible "big turn around" that may be around the corner.  As Stahleyp says, one is "hoping" for a reversion to the mean. We've been through the bad years. Might as well wait around for the perfect storm of 5x returns that bring his 10 & 15 year returns back to where they "should" be.  Bottom line is you are right, if it's not a good investment to buy today, it's probably not wise to hold on to an old investment.  But psychologically....

Link to comment
Share on other sites

 

And to tie in with the main thrust, by making the new insurance entity part of the funds, wouldn't that align incentives?

 

Didn't think his mutual fund structure would allow him to hold a company that is not publicly traded, so really don't know how he is playing this. But time will tell.

Also don't know if it would align incentives as his skill set is supposed to be in the game of purchasing mispriced/misunderstood equities. I do wish he would focus his efforts on what would prevent him from getting into more of these situations where he loses >70% on certain stocks. He knows how to pick "winners". Can he avoid "losers"? or at least get the balance titled in favour?

thanks,

 

Link to comment
Share on other sites

  • 3 years later...

For a guy managing over $500M and sitting on a private insurer worth somewhere north of $150M, your belief that Francis is all washed up is right on the money!  The nerve of this guy to keep doing something he loves, treat his investors equitably and just plain be a nice guy.   Mohnish is also another one...why do these guys continue to live and do what they enjoy!  Assholes!

At the end of 2019, Francis' compounded returns for the Associates Fund in USD was:

December 31, 2019 (Series A) 1 Year 3 Years 5 Years 10 Years 15 Years 20 Years

Chou Associates Fund ($US)1 6.5% 0.0% -4.8% 3.5% 4.0% 7.4%

S&P 500 ($US) 31.5% 15.3% 11.7% 13.5% 9.0% 6.1%

His numbers ending March 31, 2020:

Chou Associates Fund (USD) 85.02% 7.45% 7.43% 2.61% 3.73% 8.41%  

As you can see, numbers can be skewed significantly due to single year or multi-year under/over performance.  With one really good year, Francis' continues to out perform the S&P500 in USD since inception and the numbers over 3 years and 5 years increased dramatically.  So you cannot look at performance in a vacuum. 

Alot of value managers have struggled over the last few years with a rampant bull market.  That doesn't mean their results will remain dismal...I suspect Mohnish's numbers will also be skewed heavily in his favour through 2021 and 2022 as fundamental stock picking becomes more important than momentum.  Cheers!

Link to comment
Share on other sites

Posted (edited)
On 4/29/2021 at 9:08 PM, ValueMaven said:

Chou is totally washed up and his performance shows it.  Sorry, he has had some terrible allocations over the past decade.  It isnt just his style being out of favor either.  

Did it make you feel better to write that? Apology accepted but to call him washed up versus his performance is poor is... worst than being washed up. You're not the only one to say that and many others posted on the board too - hence this post is not to single you out. 

I don't often or really care to come to anyone defence, unless they're truly defenceless and Francis Chou is not defenceless. There's a reason why people stick with him regardless of his multi-year underperformance and I suspect it's due to his character - not many refund fees when the world is melting and facing massive redemptions. 

Do I see why he made those investments? Yes. Do I necessarily agree with it? No, in fact, I wholeheartedly disagreed relative to other opportunities. The very reason why RFP, Exco, etc. went up this year, could also be the reason why it goes down. Does that mean he's washed-up? Far from it. I think he's getting started. 

Not many can double down, let alone stick with an investment after repeatedly being bitten from it. Many espouses Benjamin's and Warren's philosophies' but few practice it - myself included. Reading his letters during his underperformance was a treat and I respect his conviction. The only fault that he has in my book is his love for bargains, and as he's admitted and I paraphrase, there were stocks that were priced at 100 cents/dollar but truly were worth 150 cents/dollar and others priced 100 cents/dollar but were really worth 70 cents/dollar.

Frankly, I've seen people rave about RFP @ $28, BB @ $50, Valeant @ $200 (I bought it at $200) but many not raving it when it's at a 10th of it's all-time high price, and this would be fine if they admitted they were wrong or be sympathetic when other share the same fate. I really hope the numbers Prasad put out is true, because it probably meant he averaged down over a long period and multiple times. That's alone is what I believe 99% on this board, even the world do not have the wherewithal/fortitude to replicate.

Edited by valueinvestor
Link to comment
Share on other sites

21 minutes ago, valueinvestor said:

Criticize his performance, but criticizing an individual is just poor taste. 

I agree. From what I read about him, he seems like a great person with a good heart. Truly upstanding person. 

Would I invest my money with him? No. It's not more complicated than that. 

 

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
 Share

×
×
  • Create New...