Another profile of Francis Chou...Canada's top money manager.

Chou seems faintly tired of reaffirming his faith that cheap stocks always come back up in price. "This is something that happens every six or seven years," he says. "The stuff that is cheap gets cheaper, and you have no control over it. Eventually, though, the logic prevails if you buy stocks cheap." .....

His flagship Chou Associates Fund averaged an excellent 12.2% annually from its 1986 inception through Feb. 29 of this year, and its 10-year numbers beat all comers in the global equity category. Chou RRSP, with a core of Canadian content, had a 15-year average annual return of 12.5%......

Chou uses measures like sustainable free cash flow or the ability to generate earnings in cash every year, with relatively little volatility; he also seeks companies that are well managed, even if they may have run into problems. The next step is to wait for the price of an undervalued company to fall to a level where you can purchase $1 in corporate value for 50 or 60 cents. "...

Chou recently bought Sears Holdings, which he likes because it has real estate values of $70 (U.S.) or more supporting the stock (valued in the area of $101 U.S. in early April). "You also get a great investor in [hedge fund manager] Eddie Lampert to deploy capital on your behalf," says Chou. Another recent purchase is Office Depot, which traded around $12 in April and is worth north of $25 in Chou's analysis. "Almost all retailing companies are cheap,"
-Stock Article Link.

Investing guru Francis Chou gets #1 spot for bond funds

"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..."

"As he wrote in his 2007 report to unitholders, “the cardinal principle of investing is to think first about preserving capital before thinking about making money. The greater the probability of permanent loss of capital, the greater the spread should be between a particular debt instrument and risk-free treasuries.”

He explains his 10 core principles-Stock Article Link

Investing guru, Francis Chou, Annual Report 07

"the cardinal principle underlying the investments in the Fund is to pay far less than what the company is worth, measured by sustainable earning power and/or hard assets that are not depreciating in value. In other words, we want an adequate ‘Margin of Safety’ and this concept, while unappreciated and ignored by most, is what distinguishes investment from speculation."

Francis Chou's biggest positions shown Dec 31, 2007.

Berkshire Hathaway Inc., $ 21,727,432,
Biovail Corporation,$ 19,935,191
Flagstone Reinsurance Holdings Ltd. $19,926,987
King Pharmaceuticals Inc. $63,031,859
Media General Inc., Class A $33,575,002
Overstock.com Inc. $31,016,174
RCN Corporation $15,555,082
Sprint Nextel Corporation $ 14,296,825
Sun-Times Media Group Inc., Class A, $13,878,980
UTStarcom Inc. $ 14,428,860
Watson Pharmaceuticals Inc. $26,148,981


Annual Report 2007 link

Investing Guru, Francis Chou Video Presentaion

Chou Funds averaged 14.4% compounded for 15 years. Francis explains how he uses Ben Graham's net net working capital to find bargains.

Francis Chou Presentation

"Net Net Working Capital

One of the analytical tools I find most helpful in searching for these deep values is a methodology called Net Net Working Capital (NNWC). Think of NNWC as your machete for efficiently whacking through the micro-cap jungle. This is a Benjamin Graham-style concept that values a company based on the liquid components of working capital, net of all liabilities. Specifically, the NNWC formula is:

NNWC = (Cash & Investments * 100%) + (Accounts Receivable * 75%) + (Inventory * 50%) – Total Liabilities " -Stock Article Link

Rare Francis Chou video on investing in the stock market

Here is a video presentation on stock investing from Francis Chou. By the way he talks, I would have never have guessed he is a top money manager....looks can be deceiving.

Video Link

"He has only a grade 12 education and used to labor as a Bell Canada repairman. He has never worked for a big bank or a mutual fund company. He largely shuns the Courvoisier-chugging Bay Street set. But if you're searching for the best mutual fund manager in Canada, you'll find it difficult to avoid quiet, shy Francis Chou.Quite simply, Chou's numbers are eye-popping. His flagship, the Chou Associates Fund, has achieved compounded returns of about 16% a year for 24 years, leaving his competitors in the dust.....His mantra from day one was to always invest with what Ben Graham called a margin of safety." -Stock Article Link

Francis Chou, 14.09% compounded return in the last 20 years!

"He is one of Canada's most successful mutual fund managers and also one of the most modest. At the age of 51, Francis Chou is in charge of $1.2-billion of other people's money. He is both a top stock picker and a record-setting bond manager.

"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."

Full Investing Article Link

See what Francis Chou has bought in his annual report.