Deep-value investor Francis Chou (Trades, Portfolio), founder of Chou Funds, disclosed his fourth-quarter 2022 equity portfolio earlier this month.
The guru’s Toronto-based firm’s value-oriented approach to stock picking involves a detailed analysis of a company’s strengths, focusing on its balance sheet, cash flow characteristics, profitability, industry position, competitive advantages, future growth potential and quality of the management team. On its website, the firm notes much less emphasis is placed on short-term market factors that could temporarily be crippling the stock.
Based on these criteria, 13F filings show the firm established four new positions during the three months ended Dec. 31, sold out of four stocks and added to or trimmed a handful of existing investments. Chou’s most notable trades included new holdings in Ally Financial Inc. (ALLY, Financial) and Synchrony Financial (SYF, Financial), an increased bet on Liberty Global PLC (LBTYA, Financial) and reductions of the Resolute Forest Products Inc. (RFP, Financial) and Berkshire Hathaway Inc. (BRK.A, Financial) positions.
Investors should be aware 13F filings do not give a complete picture of a firm’s holdings as the reports only include its positions in U.S. stocks and American depository receipts, but they can still provide valuable information. Further, the reports only reflect trades and holdings as of the most-recent portfolio filing date, which may or may not be held by the reporting firm today or even when this article was published.
Ally Financial
The guru invested in 155,686 shares of Ally Financial (ALLY, Financial), allocating 5.38% of the equity portfolio to the position. The stock traded for an average price of $26.59 per share during the quarter.
It is now Chou’s fifth-largest holding.
The Detroit-based bank holding company, which offers traditional banking services along with auto financing and corporate lending, has a $9.03 billion market cap; its shares were trading around $30.17 on Monday with a price-earnings ratio of 6.07, a price-book ratio of 0.86 and a price-sales ratio of 1.07.
The GF Value Line suggests the stock is significantly undervalued currently based on its historical ratios, past financial performance and analysts’ future earnings projections.
At 75 out of 100, the GF Score indicates the company is likely to have average performance going forward. While the GF Value rank was high, the ratings for profitability, growth and momentum were more moderate and financial strength was low.
Of the gurus invested in Ally Financial, Warren Buffett (Trades, Portfolio) has the largest stake with 9.96% of its outstanding shares. Bill Nygren (Trades, Portfolio), Howard Marks (Trades, Portfolio), Jim Simons (Trades, Portfolio)’ Renaissance Technologies and Louis Moore Bacon (Trades, Portfolio) also have significant positions in the stock.
Synchrony Financial
Chou picked up 58,000 shares of Synchrony Financial (SYF, Financial), dedicating 2.69% of the equity portfolio to the holding. Shares traded for an average price of $34.25 each during the quarter.
The stock is now his eighth-largest position.
The consumer financial services company, which is headquartered in Stamford, Connecticut, has a market cap of $15.58 billion; its shares were trading around $35.64 on Monday with a price-earnings ratio of 5.84, a price-book ratio of 1.29 and a price-sales ratio of 1.08.
According to the GF Value Line, the stock is modestly undervalued currently.
Further, the GF Score of 81 implies the company has good outperformance potential on the back of high ratings for momentum, GF Value and growth and middling marks for profitability and financial strength.
With a 0.26% stake, Jeremy Grantham (Trades, Portfolio) is Synchrony’s largest guru shareholder. Other guru investors include the CI Select Canadian Equity Fund (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio), Lee Ainslie (Trades, Portfolio) and Ray Dalio (Trades, Portfolio)’s Bridgewater Associates.
Liberty Global
The investor upped his Liberty Global (LBTYA, Financial) position by 706.86%, buying 84,823 shares. The transaction had an impact of 2.27% on the equity portfolio. During the quarter, the stock traded for an average per-share price of $18.19.
Chou now holds a total of 96,823 shares, which account for his ninth-largest holding with a weight of 2.59%. GuruFocus estimates he has gained 10.34% on the investment so far.
The London-based telecommunications company has a $9.82 billion market cap; its shares were trading around $21.07 on Monday with a price-earnings ratio of 7.17, a price-book ratio of 0.43 and a price-sales ratio of 1.45.
Based on the GF Value Line, the stock appears to be fairly valued currently.
The company is likely to have average performance going forward due to its GF Score of 78, driven by a high momentum rank and more moderate ratings for the other four criteria.
David Herro (Trades, Portfolio) is the company’s largest guru shareholder with a 2.87% stake. Liberty Broadband is also being held by Seth Klarman (Trades, Portfolio), Dodge & Cox, Simons’ firm, Marks and Grantham.
Resolute Forest Products
Chou slashed his stake in Resolute Forest Products (RFP, Financial) by 86.84%, dumping 1.73 million shares. The transaction impacted the equity portfolio by -24.71%. The stock traded for an average price of $20.93 per share during the quarter.
He now holds 261,460 shares total, which occupy 7.98% of the equity portfolio. It remains his second-largest holding. GuruFocus says Chou has gained 0.37% on the long-held investment.
Headquartered in Canada, the pulp and paper manufacturer has a market cap of $1.69 billion; its shares were trading around $22.02 on Monday with a price-earnings ratio of 4.05, a price-book ratio of 0.80 and a price-sales ratio of 0.46.
The GF Value Line suggests the stock is significantly overvalued currently.
With a GF Score of 66, the company has poor performance potential based on a high financial strength rating, moderate profitability, growth and momentum ranks and low GF Value.
Holding a 39.77% stake, Prem Watsa (Trades, Portfolio) is Resolute Forest Products’ largest guru shareholder. Grantham, Donald Smith & Co., Simons’ firm and several other gurus also have positions in the stock.
Berkshire Hathaway
The guru’s investment in Class A shares of Berkshire Hathaway (BRK.A, Financial) was curbed by 20%, selling 20 shares. The transaction had an impact of -5.82% on the equity portfolio. During the quarter, shares traded for an average price of $448,762 each.
Chou now holds, in total, 80 shares, which represent his largest holding with a weight of 53.01%. GuruFocus found he has gained 158.73% on the investment over its lifetime.
The insurance conglomerate led by Buffett, which is based in Omaha, Nebraska, has a $668.49 billion market cap; its Class A shares were trading around $459,718 on Monday with a price-book ratio of 1.48 and a price-sales ratio of 2.66.
According to the GF Value Line, the stock is modestly overvalued currently.
The GF Score of 88 means the company has good outperformance potential. Despite receiving high ratings for three of the criteria, the financial strength rank was more moderate and the GF Value was low.
Tom Russo (Trades, Portfolio) is the largest guru shareholder of Berkshire’s Class A stock with a 0.18% holding. Chris Davis (Trades, Portfolio), Tom Gayner (Trades, Portfolio), First Eagle Investment (Trades, Portfolio), Tweedy Browne (Trades, Portfolio) and many other gurus also own the stock.
Additional trades and portfolio composition
During the quarter, Chou also purchased investments in CI Financial Corp. (CIXXF, Financial) and Methanex Corp. (MEOH, Financial) and sold out of JPMorgan Chase & Co. (JPM, Financial), The Goldman Sachs Group Inc. (GS, Financial), POSCO Holdings Inc. (PKX, Financial) and Genius Brands International Inc. (GNUS, Financial).
The guru’s $71 million equity portfolio, which is made up of 18 stocks, is heavily invested in the financial services sector at 69.93%.
