– By James Li
Francis Chou (Trades, Portfolio), fund manager of Chou Associates Management, disclosed this week that his firm’s top trades during the first quarter included the expansion of its Berkshire Hathaway Inc. (NYSE:BRK.A)(NYSE:BRK.B) holding and new buys in Sanofi SA (NASDAQ:SNY), Spirit Airlines Inc. (NYSE:SAVE) and Allegiant Travel Co. (NASDAQ:ALGT).
Chou started his investment club in 1981 with six of his fellow telephone repairmen, turning the club into Chou Associates Fund in 1986. The fund seeks long-term capital appreciation by buying bargains and getting the returns slowly: Chou’s value-oriented approach to investing emphasizes the strengths of individualized companies on the basis of balance sheet information, cash flow characteristics, profitability, industry position, special strengths, future growth potential and management ability.
As of March 31, Chou’s $100 million equity portfolio contains 19 stocks, with three new positions and a turnover ratio of 18%. The top three sectors in terms of weight are financial services, health care and basic materials, representing 60.93%, 27.54% and 6.46% of the equity portfolio.
Chou purchased 50 Class A shares of Berkshire Hathaway (NYSE:BRK.A), expanding the position 50% and the equity portfolio 13.61%. While shares averaged $366,631 during the first quarter, Berkshire’s Class A shares closed on Friday at around $437,259, approximately 91% of its GF Value of $475,768.
GuruFocus ranks Warren Buffett (Trades, Portfolio)’s insurance conglomerate’s profitability 7 out of 10 on the back of a four-star business predictability rank and net margins and returns outperforming over 90% of global competitors despite three-year revenue growth rates topping just over 60% of global insurance companies.
Other gurus with holdings in Berkshire include Chris Davis (Trades, Portfolio)’ Davis Select Advisors and Tom Gayner (Trades, Portfolio)’s Markel Gayner Asset Management.
Chou purchased 20,000 shares of Sanofi (NASDAQ:SNY), giving the position 0.87% weight in the equity portfolio. Shares averaged $48.03 during the first quarter; the stock is fairly valued based on Friday’s price-to-GF Value ratio of 1.05.
GuruFocus ranks the French drug manufacturer’s profitability 7 out of 10 on the back of profit margins and returns outperforming over 80% of global competitors.
Chou purchased 50,000 shares of Spirit Airlines (NYSE:SAVE), giving the position 0.65% weight in the equity portfolio. Shares averaged $32.06 during the first quarter; the stock is significantly overvalued based on Friday’s price-to-GF Value ratio of 2.20.
GuruFocus ranks the Miramar, Florida-based airline’s financial strength 2 out of 10 on several warning signs, which include a low Piotroski F-score of 2, a weak Altman Z-score of 0.65 and a debt-to-equity ratio that underperforms over 85% of global competitors.
Chou purchased 4,317 shares of Allegiant Travel (NASDAQ:ALGT), giving the position 0.35% weight in the equity portfolio. Shares averaged $221.97 during the first quarter; the stock is significantly overvalued based on Friday’s price-to-GF Value ratio of 2.76.
GuruFocus ranks the Las Vegas-based air travel company’s financial strength 3 out of 10 on several warning signs, which include a low Piotroski F-score of 3, a weak Altman Z-score of 1.53 and interest coverage and debt ratios underperforming over 80% of global competitors.
Disclosure: Long Allegiant Travel.
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This article first appeared on GuruFocus.