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Chou Funds 2008 Annual Report!


Parsad
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Francis has put out his 2008 Annual Report.  Alot of good stuff he talks about in there.

 

http://www.choufunds.com/pdf/AR08.pdf

 

He refunded most or all of the MER in two of his funds where he was dissatisfied with the performance.  How many fund managers have done that this year?  None that I know of.

 

He doesn't know what the market holds for us in the short-term, but believes that investors will be very happy ten years from now.  Cheers!

 

 

 

 

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Its probably a great reverse indicator.  Every time Chou gives back money to his investors in terms of the MER or back-end fees, the fund is probably poised to increase in value.

 

But Sanjeev, I agree, the most important aspect is the honor, the integrity, and the leadership displayed by this act.  This is what leadership is about and these types of acts should be highlighted in this world where executives which have blown up their companies not only continue to keep the bonuses from prior years without returning them (that thought would not even cross their pitiful minds), they not only continue to accept lavish retirement packages, but it also takes major public pressure for them to forgo their 2008 and 2009 bonuses.

 

What a telling contrast.  And let's not forget, Francis won mutual fund manager of the decade in Canada by Morningstar.  Instead of being arrogant and on his high horse like the rest of gang of executives that expect entitlements, he continues to give back the MER just like he did in 1999.  He should be put on a pedestal. 

 

Someone needs to get this story on the front page of the Globe. 

 

 

 

 

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Francis Chou is a very decent and fair manager.  This being said, given the choice of him vs. Sprott, I would not hesitate.  Sprott has materially higher returns over whatever long-term periods one chooses.  And the returns, similarly to Chou, have been accomplished with lots of cash at various times.

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I emailed Rob Carrick this morning at the Globe & Mail.  He's already planning on writing about it and has contacted Francis.  There are some decent journalists out there!  ;D

 

In regards to the Sprott or Chou comment, they are different types of managers.  Sprott has better absolute numbers, but he also shorts a fair amount and will concentrate his fund in specific sectors.  Take a look at his Canadian Growth fund.  It's got about an 80% concentration in commodities!  He also uses leverage from time to time.  The difference between the two narrows considerably if they had the same constraints.  And I haven't seen Sprott refund any of his management fees after the punishment he took in most of his funds this year as well.  Cheers!

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Sanjeev, you are a smart guy but on this issue, I think you are missing the facts:

 

In regards to the Sprott or Chou comment, they are different types of managers.  Sprott has better absolute numbers,

>>>  yes, about 19% vs 10% long term (Chou Associates vs Sprott Canadian Equity).  So Chou has slightly outperformed the indices when Sprott has literally killed them.

 

but he also shorts a fair amount

>>>  In the Canadian Equity, he can short up to twenty % of assets and only since mid 2005.  This is responsible for a very very small portion of the outperformance since 1997!

 

and will concentrate his fund in specific sectors.  Take a look at his Canadian Growth fund.  It's got about an 80% concentration in commodities!

>>>  So what?  The commodities include a variety of sectors (precious metals, base metals, energy, ..)  they don't all move in sync and various companies in the individual sectors perform differently.  Nobody precludes you, me or Chou to go there for a significant part of our assets.  One could be in auto, financials, homebuilding, and retailers and appear not concentrated but would still be very dependend on the consumer spending.

 

  He also uses leverage from time to time.

>>>  never on the mutual fund.

 

  The difference between the two narrows considerably if they had the same constraints.

>>>  except fort the shorting you don't list any different constraints.

 

And I haven't seen Sprott refund any of his management fees after the punishment he took in most of his funds this year as well.  Cheers!

>>>  Comparing the longers funds, you see the huge difference.  Chou is very nice and humble and has good performance.  Sprott is absolutely unbelievable and kills Chou's performance refund or not.  Maybe this will change int he future but they are definitely not in the same class in my book, at least performance wise. 

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Keep in mind that most of Sprott and Chou's great performance numbers, when they shot the lights out, were when each of their assets under management were tiny (less than $100M). I stlll think both are great managers and are capable of doing better than their respective benchmarks over the long-term. However, they manage such large amounts of capital these days that it will certainly be more difficult for them to generate pre-2000 returns.

 

An additional note on Sprott. It appears his strategy has changed over time. He uses a more top-down thematic approach now, perhaps to accomodate his larger asset base. Whereas in his earlier days he was more of a stock picker. Francis doesn't look like he's changed one bit (which is a good thing).

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I always held Irwin Michael in high regard, and in the same class of stockpicker as Francis Chou. However, I must confess, that after seeing the recent results for ABC funds, i'm starting to doubt his ability to outperform. I know alot of the carnage is general market crash that he cannot control, and it is easy to criticize in hindsight through the rear view mirror. However, what bothers me is some of the individual picks such as GM and Lakeview Reit and some others?

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