Chou Associates Fund - Pfizer purchasing KG

[ourkid8]

9.2% of the fund was in KG (largest holding)

$11.23 /Chou's average purchase price (Pfize purchasing for $14.25)

 

Pfizer Inc. offered to buy the specialty drug manufacturer for $3.6 billion in cash.... This is amazing news as it's a 27% gain on it's largest position (9.2% of the fund!!!)  :)  Congrats to all fund holders...

 

I am posting this thread under Fairfax Financial as Fairfax holds approximately 23.2% of the Series A Units of the fund.

 

Thanks,

 

S

[Myth465]

I saw this on the highest movers and was wondering what was up. Slightly annoying I dont own any but great for Chou.

[Uccmal]

I am not thinking that Francis will be real thrilled with this.  He has had this holding for the better part of a decade meaning his return is very low on an annualized basis.

[ourkid8]

That is actually a very good point. (I should have paid attention to that)  I am going to create a spreadsheet to find out what Chou's annual return is on KG.  Chou Associates is a core position in my portfolio which I have held for about 2-3 years... (I am benefiting off this deal)

 

 

I am not thinking that Francis will be real thrilled with this.  He has had this holding for the better part of a decade meaning his return is very low on an annualized basis.

[FFHWatcher]

That is actually a very good point. (I should have paid attention to that)  I am going to create a spreadsheet to find out what Chou's annual return is on KG.  Chou Associates is a core position in my portfolio which I have held for about 2-3 years... (I am benefiting off this deal)

 

 

I am not thinking that Francis will be real thrilled with this.  He has had this holding for the better part of a decade meaning his return is very low on an annualized basis.

 

At this point, I doubt Francis cares what his annual rate of return is on that particular stock was?  I don't mean that disrespectfully to Francis as I trust him with about 20% of my net (investible) assets (not to be confused with my GAAP Net Worth) but I am pretty sure that Francis will be pretty darn happy to see a King get taken out at a 40% premium which equates to about a 4% pop in his fund in one day.  I know he is pretty much a purist when it comes to value investing but you gotta take the good with the bad, take the cash and redeploy it somewhere else...or don't tender the shares or sell them on the open market and wait for a higher price (like all of us did with ORH, kinda). 

 

If he has held it for 10 years, his investment thesis likely didn't turn out as he had hoped or his time line was off?  Either way, my personal experience has been that when you hold many, many stocks, you tend to look at things as a portfolio.  This is a nice pop to his entire portfolio and he has outperformed his group avg. by about 2% points in the past 12 months and has outperformed the group avg. by about 5% per year for the past 10 years (GlobeFund comparison so don't quote me and compare him to something else...compare him to whatever you want too).  Overall, nothing to get too upset about and King Pharma will increase those numbers a bit.    That's my take...maybe he wants to add to this Fibrek investment? :-) 

[FFHWatcher]

Chou Associates Fund up 4.36% in Cdn $$ terms for the week based on King Pharma buyout from Pfizer.

Up 12.22% Cdn $ YTD (US$ version is up 16.25% YTD)

 

[Uccmal]

FFHWatcher, No arguments here.  I am quite familiar with his style and holdings.  Obviously one cannot plan the outcome with deep value investing, hence the level of diversification.  Francis operates similar to Graham, with modifications in value determination to fit the present day.

[biaggio]

"He has had this holding for the better part of a decade meaning his return is very low on an annualized basis."

 

How patient should one be? If you own something that is trading at 50% discount to IV-how long do folks here hold it? Especially if IV is not growing or paying out a dividend.

 

I like Pabri's rule of holding for at least 3 years.

[stahleyp]

"He has had this holding for the better part of a decade meaning his return is very low on an annualized basis."

 

How patient should one be? If you own something that is trading at 50% discount to IV-how long do folks here hold it? Especially if IV is not growing or paying out a dividend.

 

I like Pabri's rule of holding for at least 3 years.

 

I think it depends on what opportunities are also out in the market. In general, I've read that most great value investors will hold 3-5 years.

[Uccmal]

I dont think the holding period is relevant in any case.  The ability to assess a holding from time to time and determine if the cash is better elsewhere is the mark of a good investor.  Francis is very careful on purchase, and makes a concerted effort to keep his MERs low and minimize taxes.  None the less, There is a range of outcomes that can be expected.

 

I dont hold his fund or any other funds but his would be among my top choices if I was looking at such a beast.

[Rabbitisrich]

Chou Associates purchased most of its position in 2007 at ~$11, so this investment has been a very modest winner.