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Francis Chou's RRSP Fund Buys 5 in 4th Quarter

- By James Li

Francis Chou (Trades, Portfolio)'s Chou RRSP Fund (Trades, Portfolio) disclosed this week its five new positions for fourth-quarter 2018 are Bausch Health Companies Inc. (BHC)(BHC.TO), Bank of America Corp. (BAC), Magna International Inc. (MG.TO), Fairfax Financial Holdings Ltd. (FFH.TO) and Linamar Corp. (LNR.TO).


Managed by Chou Associates Management Inc., the fund seeks equity and debt investments primarily from Canadian businesses using a value-oriented approach that emphasizes strength of companies' balance sheets, cash flow characteristics, profitability, industry position and future growth potential.

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Bausch Health Companies

The fund invested in 298,992 shares of Bausch Health Companies. The stock had an average price of 30.6 Canadian dollars ($22.91), giving the position 15.51% equity portfolio weight.

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The Laval, Quebec-based company operates four business segments: Bausch and Lomb International, Salix, Ortho Dermatologics and Diversified Products. Bausch CEO Joseph Papa said in a Feb. 20 press release that the company "delivered organic revenue growth across all key businesses while reducing [the company's] total debt by more than $1 billion." Organic revenues for the Bausch and Lomb International segment increased 5% year-over-year during the December 2018 quarter primarily due to high product volumes, while organic revenues for the Salix segment increased 12% driven by higher sales in drugs like Xifaxan and Relistor.

Bank of America

The fund invested in 93,376 shares of Bank of America, a major Warren Buffett (Trades, Portfolio) bank holding. Shares of the Charlotte, North Carolina-based bank averaged $28.73 during the quarter; the fund dedicated 6.46% of its equity portfolio to the position.

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Bank of America provides a wide variety of financial services through business segments like consumer banking, global wealth and investment management, global banking and global markets. The company's financial strength ranks a modest 4 out of 10: Although the bank's debt-to-equity ratio is near a 10-year low of 0.9, the ratio still underperforms 63% of global banks.

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Despite poor financial strength, Bank of America's net margin is near a 10-year high of 30.92% and outperforms 68% of global competitors.

Magna International

The fund invested in 20,000 shares of Magna International for an average price of 68.59 Canadian dollars ($51.33), giving the position 2.55% equity portfolio space.

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The Aurora, Canada-based company manufactures a wide range of auto parts: Groups range from interiors, exteriors, chassis, seating and powertrain. GuruFocus ranks the company's profitability 7 out of 10 on several positive signs, which include expanding profit margins and consistent revenue growth. Magna International's business predictability ranks 3.5 stars out of five.

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Bernard Horn (Trades, Portfolio) also invested in shares of Magna International during the quarter.

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Fairfax Financial

The fund invested in 2,000 shares of Fairfax Financial for an average price of 667.4 Canadian dollars ($498.73), giving the position 2.47% equity portfolio space.

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Fairfax, led by Chairman and CEO Prem Watsa (Trades, Portfolio), engages in property and casualty insurance, reinsurance and investment management. According to its website, the conglomerate also seeks to invest in assets on a total return basis using a conservative value investment philosophy.

GuruFocus ranks Fairfax's financial strength 5 out of 10: Although the company's return on invested capital exceeds its weighted cost of capital, suggesting capital creation, Fairfax's cash-debt ratio of 0.79 and equity-asset ratio of 0.20 underperform 98% and 61% of global competitors.

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Linamar

The fund invested in 24,000 shares of Linamar for an average price of 53.84 Canadian dollars ($40.27), giving the position 2.24% equity portfolio space.

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The Guelph, Canada-based company manufactures powertrains and drivelines for vehicle and power generation markets. GuruFocus ranks the company's profitability 8 out of 10 on several positive signs, which include expanding profit margins and consistent revenue growth. Linamar's operating margin has increased approximately 9.50% per year over the past five years and is outperforming 79% of global competitors.

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Disclosure: No positions.

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This article first appeared on GuruFocus.