Value Investor Francis Chou’s Top Picks Include…Berkshire Hathaway Inc. (BRK.B)

Troubled department store Sears Holdings Corp (NASDAQ:SHLD) was another of Chou’s largest holdings with the 13F disclosing ownership of about 680,000 shares. The retailer is unprofitable on a trailing basis, and is expected to be so next year as well (though losses per share are expected to be cut nearly in half). 46% of the float is held short as many market players are skeptical of a turnaround. In its most recent quarter, Sears’s revenue declined by 9% compared to the same period in the previous fiscal year and with the industry as a whole struggling we would avoid it.

Chou Associates Management had about 340,000 shares of Actavis Inc (NYSE:ACT) in its portfolio as of the beginning of April. The pharmaceutical company, which is best known for its strength in generic drug offerings, has risen about 50% year to date and has been reporting good revenue numbers. The sell-side is forecasting $9.55 in earnings per share for 2014, implying a forward price-to-earnings multiple of 13. This would be a fairly cheap multiple assuming that Actavis can convert its revenues into better earnings, and so we’d be interested in learning more about the company.

We’ve mentioned our concerns about Berkshire Hathaway Inc. (NYSE:BRK.B) and Dell, though investors who are more confident in Buffett’s ability to choose successors and those who are interested in merger arbitrage opportunities may want to consider those stocks as well as Actavis. In the cases of both Resolute and Sears, we’re bearish on the industry and the individual companies have not been performing well enough recently for us to consider them as potential value plays right now.

Disclosure: I own no shares of any stocks mentioned in this article.