It was awesome to have the opportunity to listen to the wisdom of Francis Chou, who manages over $1 billion, in person at the Richard Ivey School of business via George Athanassakos’ value investing class. I learned many things during the course of the discussion and will share a few of the ideas here.
With regards to learning how to be better investors, Mr. Chou informed us that reading the autobiographies of great value investors and watching the actions of the best value investors is a great way to learn. He singled out an autobiography by Bernard Baruch as an example of an autobiography that he has read. An interesting anecdote for value investors is that Benjamin Graham caught the eye of Bernard Baruch in the 1920’s who tried but failed to bring the younger Graham on as his junior partner.
Mr. Chou doesn’t take a top down approach to stock analysis. From what I gathered, he is a microfundamentalist who looks for value opportunities all over the globe. Importantly, Mr. Chou does not take just one view on valuing a security but rather looks at an investment opportunity from several different perspectives. He told us that you can feel more certain about purchasing a company when all of the different views are consistently indicating value. As an example, his reply to the question of whether the housing market was undervalued in the US was that some housing value indicators seem cheap but if you look at the pricing from a historical rental to home price perspective, the housing market is not overly cheap.
Mr. Chou cautiously indicated that doubling down positions with investments is okay, but only if you are very certain of the company and the situation. He mentioned that value investors often buy in early and therefore feel like they should buy more if the stock has fallen below their entry price. He acknowledged that with excellent knowledge of the situation you could concentrate your holdings more on a few stocks in the same way the Buffet does, but suggests that you had better know the company as well as Buffet would before doing so. Tellingly, he left us with the advice that the first step to getting out of a hole is to stop digging.
In closing, I found Mr. Chou to be a rarity in the investment world. He is a very well read and successful value investor, but still very humble and generous. In my opinion, Mr. Chou is a refreshing role model for investors in an industry commonly motivated by greed and selfishness.