Chou Associates REALLY Loves Its Portfolio, Because It Didn’t Touch It Last Quarter

Chou Associates Management Inc. aims to provide long term growth of capital. The fund mainly invests in the US securities and has fairly diversified portfolio. Finance stocks form 33% of the portfolio followed by Health Care stocks forming 19%. Consumer discretionary stocks account for 12% of its holding. The investment fund invests in common and preferred stock as well as in convertible debentures and corporate bonds.

Chou Associates Fund has offered compounded annual return of 7.5% over the course of past five years. This article will discuss some of the stocks held by Chou Associates Management and their overall outlook. These stocks are Valeant Pharmaceuticals Intl Inc. (NYSE:VRX), Berkshire Hathaway Inc. (NYSE:BRK.A), Resolute Forest Products Inc. (NYSE:RFP), Nokia Corp (ADR) (NYSE:NOK) and Citigroup Inc. (NYSE:C).

The smart money sentiment is an important metric that can be used to assess the long-term profitability of a stock. While there are thousands of stocks trading daily on the market, taking a look at what hedge funds think about certain companies can narrow down the search significantly. At Insider Monkey, we track more than 700 hedge funds, whose 13F filings we analyze as part of our small-cap strategy. Our research has shown that imitating a portfolio that includes the 15 most popular small-cap stocks among hedge funds can outperform the market by as much as 95 basis points per month on average (see more details here).

Valeant Pharmaceuticals Intl Inc. (NYSE:VRX) stock dipped 76% this year so far. However, the stock accounted for 13.14% of the portfolio. For the quarter ended on 30^th September, 2016, the investment fund held 1.44 million shares of Valeant amounting to $35.52 million. Of the hedge funds in our database, 60 funds currently hold $2.11 billion worth of Valeant shares in their portfolio at the end of the June quarter, which equals to 30.80% of the outstanding shares. Valeant is said to be mulling the sale of Salix Pharmaceuticals to Takeda, Japan’s largest pharmaceuticals group. The deal is potentially likely to be worth $10 billion. Valeant had acquired Salix less than two years back. However, no other details of the probable deal have been provided.

Berkshire Hathaway Inc. (NYSE:BRK.A) stock gained 7% in this year so far. Chou Associates Management held $32.43 million worth of Berkshire Hathaway stock at the end of the September quarter, forming 12% of its portfolio. Chou Associates Management had 150 shares of the company in its portfolio at the end of the period. Among the funds we track, 78 funds held $19.43 billion worth of Berkshire Hathaway’s stock in aggregate at the end of June, having amassed 5.4% of its outstanding stock. One of Berkshire’s top positions is Wells Fargo, which is currently embroiled in various controversies including fake accounts.Wells Fargo also saw the departure of its CEO in the wake of the scandal. Berkshire currently owns 10% stake in the bank.

Resolute Forest Products Inc. (NYSE:RFP) stock forms 8.58% of  Chou Associates Management’s portfolio at the end of September quarter. The fund held 4.9 million shares of the company with the market value of $23.199 million.  The number of funds from our hedge fund database long Resolute Forest was at 16 in the quarter ending June. The total value of their holdings stood at $227 million, in comparison to $238 million held by 14 funds at the end of previous quarter. Shares of the stock are down 38% year-to-date.

Nokia Corp (ADR) (NYSE:NOK) stock declined 35% this year so far. However, the company offers healthy dividend yield of 6.74%. Chou Associates Management held 3.75 million shares of the company during the September quarter. The market value of the holding stands at $21.712 million and forms 8.03% of Chou Associates Management’s portfolio. 15 hedge funds from our database have positions in Nokia, with total holdings of about $369 million as on the end of June quarter, amounting to about 1.10% of the company’s outstanding stock. Nokia announced its third quarter revenue at $6.6 billion, falling 7% on year-over-year basis and 6% on a constant currency basis. The company reported its earning at $0.05 per share. The consensus estimate for sale and net profit stood at $6.5 billion and $0.05 per share respectively.

Citigroup Inc. (NYSE:C) stock has advanced 10% this year. Chou Associates Management held 410,000 shares of Citigroup worth $19.36 million as on the end of September quarter. 97 hedge funds we track hold about $8.49 billion of Citigroup stock as on the end of June quarter, in comparison to 101 funds holding stock worth $8.03 billion the previous quarter. Citigroup is currently in the middle of an interest swap investigation. The investigation is being carried by The US Commodity Futures Trading Commission and the bank said that it is cooperating with the authorities. According to its quarterly securities filing, the bank stated that the investigation is related to “the trading and clearing of interest rate swaps by investment banks.”

DISCLOSURE – NONE