Chou Funds 2012 Annual Report

[Parsad]

I always wait for Francis' annual report.  It's short, but he puts things quite succinctly.  While some of you ponder Fairfax's worries and their hedged portfolio, Francis lays out a better case of why people should worry a bit rather than Fairfax's more discreet commentary.  Always a good read!  Cheers!

 

http://www.choufunds.com/pdf/AR12.pdf

[Guest hellsten]

Thanks.

 

Interesting, I didn't know about this rule and what it means for fund managers. Good to know that this might be a reason why Chou doesn't buy more if a stock declines, or that he has sold a stock and plans on buying it back later:

At first blush, this would seem to be an opportune time to take advantage of the lower

price and buy more of the stock. The problem is that we’ve already bought close to the 10%

maximum limit. The mantra of value investing is that if we are willing to buy a stock at 60% of its

intrinsic value, we should buy more of it if it is trading below that.

 

Interesting that he's still holding OSH, although a very small amount. Would be interesting to hear more about his thoughts on RSH. I agree retailers (SVU, RSH, SHLD, etc) are cheap, or were cheap:

Aside from a couple of industries like the financial institutions in the U.S. and companies in the retail sector, we are not that comfortable with

the prices of many stocks.

 

Thinks market is fairly valued:

But when the market is closer to being fairly valued as it is now, I tend

to fret about issues that I would ignore if the stock market was very cheap.

 

Would be interesting to hear what he thinks about SD and CHK:

I would be wary of investing in any company where the price of a commodity plays a significant role in the company making money.

 

IMHO, there are 3 positive lollapalooza effects behind natural gas:

- Oil vs gas price

- US price vs international price

- Energy independence

 

Seems he lost a lot of money on UTStarcom today:

"Shah Capital offers to buy UTStarcom Holdings"

http://www.businessweek.com/ap/2013-03-27/shah-capital-offers-to-buy-utstarcom-holdings

 

Heracles General Cement Company looks fairly interesting:

http://investing.businessweek.com/research/stocks/snapshot/snapshot.asp?ticker=HRAK:GA

http://financials.morningstar.com/cash-flow/cf.html?t=HRAK&region=GRC&culture=en-us

http://financials.morningstar.com/balance-sheet/bs.html?t=HRAK&region=GRC&culture=en-us

 

Topps Tiles PLC?

[mhdousa]

Interesting.  He admits he's victim to anchoring bias.  Shows you how powerful theses biases are when even someone like him can't get around it (bolded by me):

 

Instead of staying flat for a month after selling the warrants, the price rose appreciably and we were not able to buy back the TARP warrants at a cheaper price. The higher price was still relatively inexpensive, but I couldn’t bring myself to buy at a price considerably higher than what I sold them for.

 

[LC]

So there IS a reason he sold his BAC.A Warrants! Damn, too bad he couldn't get back into them at a better price!

[txlaw]

So there IS a reason he sold his BAC.A Warrants! Damn, too bad he couldn't get back into them at a better price!

 

http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/bac-wt-bank-of-america-warrants/msg104086/?topicseen#msg104086

[LC]

So there IS a reason he sold his BAC.A Warrants! Damn, too bad he couldn't get back into them at a better price!

 

http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/bac-wt-bank-of-america-warrants/msg104086/?topicseen#msg104086

I'll tell ya, there are some brilliant people on this board :)

[Guest longinvestor]

Interesting to read Chou, keeps it short & simple.

 

The 10% holding limit is crazy, all the selling and buying that funds have to resort to causes so much frictional cost (& lost opportunties) besides tying the managers hands. Thank goodness individual investors don't have to deal with this.

[ourkid8]

BAC A warrants have sold off and wondering if Francis has started nibbling away?  As per his semi-annual report, his average cost which he was looking to decrease was $5.88.  (6% below his previous cost price)  He is sitting on a lot of cash and just waiting to pounce!!!

 

Tks,

S

[NormR]

BAC A warrants have sold off and wondering if Francis has started nibbling away?

 

Not as of Tuesday when I asked him  :)

[muscleman]

I always wait for Francis' annual report.  It's short, but he puts things quite succinctly.  While some of you ponder Fairfax's worries and their hedged portfolio, Francis lays out a better case of why people should worry a bit rather than Fairfax's more discreet commentary.  Always a good read!  Cheers!

 

http://www.choufunds.com/pdf/AR12.pdf

 

His track record seems to be only slightly better than the index. Doesn't seem to be as stunning as Bruce Berkowitz or Eddie Lambert. ::)

[Sportgamma]

The U.S. money supply has expanded substantially since 2007 regardless of how you measure it (M1, M2 or M3). But the full impact of the expanded money supply has not yet been felt because confidence remains subdued. In fact, the velocity of money has plummeted below its previous mid-1969 level. Losses in confidence are short-term in nature and when confidence does return and the velocity of money returns to more normalized levels, watch out for inflation. I would not buy into any long dated fixed-income instruments that are dependent on interest rates particularly those issued by countries that are aggressively expanding their money supply.

 

 

[mcliu]

The U.S. money supply has expanded substantially since 2007 regardless of how you measure it (M1, M2 or M3). But the full impact of the expanded money supply has not yet been felt because confidence remains subdued. In fact, the velocity of money has plummeted below its previous mid-1969 level. Losses in confidence are short-term in nature and when confidence does return and the velocity of money returns to more normalized levels, watch out for inflation. I would not buy into any long dated fixed-income instruments that are dependent on interest rates particularly those issued by countries that are aggressively expanding their money supply.

 

Is it odd that Francis is warning about inflation while Watsa is concerned about deflation? Or is this just a time-frame issue?

[Parsad]

I think if you look at their comments...they agree on many things, but their views differ on other issues as well.  Francis has been very bullish over the last three years, whereas Fairfax has been incredibly bearish.  Francis is concerned about short-term deflation and long-term inflation, whereas Fairfax has taken a hedge to protect themselves from longer-term deflation.  Fairfax is leveraged, whereas Francis is not.  So I think perspective matters in their comments.

 

Also, I think what you have to do is take their comments, anyone's comments, with a grain of salt.  This is all art, not science as things unfold.  The territory is uncharted since 1929, and not really particularly well-documented when you look at the sheer scope of The Depression and Japan's Deflation Era.  You would think that a clear answer would be present when examining both issues, but there is no clear answer and never has there been consensus on what to do.  It's far easier to predict the weather, than the state of global financial circumstances presently.  Cheers!

[ItsAValueTrap]

His track record seems to be only slightly better than the index.

Isn't Chou in the top 1% of all Canadian mutual fund managers?

 

*There are always aberrations in the top performers.  A lot of the top performers in Canada rode the bull market in juniors and commodities from ~2003-2007... since 2007 they have been getting hurt.  I think many of those managers were simply more lucky than skilled; they were heavily concentrated in a sector that happened to do really well.

Chou deserves some credit for being diversified.  I believe he owned very few commodities stocks since inception.