Francis Chou

Born in 1952 in Phnom Penh, Cambodia, of Chinese descent. Emigrated to Canada as a young man with very little money. Self-taught investor who worked as a telephone line repairman at Bell Canada while studying investing on his own, devouring the works of Benjamin Graham, Warren Buffett, and other value investing luminaries. In 1981, he started an investment club at Bell Canada with co-workers, pooling their savings. The club's returns were so strong that it eventually became the Chou Associates Fund, formally launched in 1986. Chou never attended business school or obtained any formal financial credentials — he learned entirely through reading and practice. He runs Chou Associates Management Inc. out of a modest office in Toronto with a tiny team. Known for his humility, frugality, and intellectual honesty. Often compared to a 'Canadian Warren Buffett' for his folksy style and deep value orientation, though he is far less well-known. One of the most remarkable self-made investment stories in Canadian history.

The Chou Associates Fund has one of the best long-term track records in Canadian investing. From inception in 1986 through the mid-2010s, the fund compounded at approximately 12-13% annualized, significantly outperforming the S&P/TSX Composite and S&P 500 over that period. However, the fund went through a brutal stretch from 2014-2020, significantly underperforming as deep value and distressed investing fell deeply out of favor. Energy and resource holdings, distressed debt positions, and contrarian bets suffered during this period. The fund's AUM declined from a peak of over $800M to under $200M as investors fled. This is a pattern common to deep value investors during extended growth-dominated markets. The fund has shown signs of recovery in recent years as value has rotated back into favor. The Chou Bond Fund, focused on distressed bonds, has also had strong long-term returns but similar volatility. Chou's track record demonstrates the challenge of deep value investing: spectacular long-term returns punctuated by painful multi-year drawdowns that test investor patience.

Historically: Resolute Forest Products, Overstock.com (bought deep in single digits before its multi-bagger run), EXCO Resources, Sears Holdings (bonds and equity), various distressed energy bonds, Berkshire Hathaway, Bank of America warrants, Sprint bonds, and numerous obscure Canadian small-caps. The portfolio often contains names that most investors have never heard of. In recent years, the fund has held positions in technology companies, special situation equities, and distressed credit. Chou has a knack for finding deeply undervalued situations that the market has given up on.

High relevance. Chou's philosophy is closely aligned with ours: emphasis on downside protection, margin of safety, willingness to be contrarian, long-term holding periods, concentrated positions, and intellectual honesty about mistakes. His approach to analyzing balance sheets for hidden assets and liabilities mirrors our floor price philosophy. His willingness to hold cash when no bargains exist is admirable discipline. His shareholder letters are educational gold — worth reading for their analytical frameworks alone. The key difference is his comfort with distressed debt and workout situations, which adds complexity we may not want. He also has no particular focus on AGI or technology disruption, being more of a traditional deep value investor. His recent underperformance during the growth-dominated era is a cautionary tale about the behavioral challenges of deep value investing.