Value Investing

had read a bunch of stuff on investing ever since I had gotten interested: Supermoney, about Ben Graham and Warren Buffett; Graham's Intelligent Investor; Security Analysis; David Dreman's Psychology in the Stock Market. Combine those books and those approaches, and what you have is basically a contrarian, value-based methodology, which, psychologically, was very compatible with the way I tended to think about things. I tend to think stocks are more attractive at lower prices rather than higher prices.

And that wasn't psychologically congenial to me either, because I have no discipline. I just sort of wander around the overall in search of things.

The key thing would be — as Warren Buffett says — you need to be fearful when others are greedy, and greedy when others are fearful. So when the market's been down for a while, and it looks bad, then you should be more aggressive, and when it's been up for a while, then you should be less aggressive."

"Well, if you do what other people do, you get the results that other people get.So by diversifying your sources of information, you get insights, analogies and metaphors, and you see connections that other people might not see."

George Athanassakos, professor of finance and the Ben Graham Chair in Value Investing at the Richard Ivey School of Business in London, Ont.,

they master their emotions. They're patient. They don't want the world to pay attention to them. They want to invest privately and under the radar."

He is one of Canada's most successful mutual fund managers and also one of the most modest. At the age of 51, Francis Chou is in charge of $1.2-billion of other people's money. He is both a top stock picker and a record-setting bond manager.

half a dozen co-workers chipped into a pool that totalled $51,000 and created the fund that became Chou Associates.

The original investment club was converted to a mutual fund in 1986 and, over the next 20 years,

. “Will I pay up for a stock? Absolutely not!” he laughs. “I would rather lose half my unitholders than lose half my unitholders’ money.”

claims no industry specialization

given that he worked as a technician for Bell Canada before he took to managing money in the early 1980s. He has since earned a CFA designation.

The fund has been managed by Francis Chou since it went public in 1986. Prior to this it was managed as part of a private investment club. Mr. Chou is perhaps unusual among money managers in that he manages both the Associates and RRSP funds in his spare time. When he is not adding value for his investors he is a vice-president of Fairfax Financial.

In late 2002 the Associates fund received a $50 million investment from Fairfax, increasing the fund's assets by almost a factor of six. To avoid any potential conflicts, or the appearance thereof, Mr. Chou has entered into appropriate arrangements with Fairfax concerning trading activities. Furthermore, he is foregoing any compensation or benefits arising from his position as a Fairfax executive.

a contrarian deep value style with discipline. Mr. Chou favours well-managed companies that have a solid record of prudent capital management and at least ten years of sustained return-on-equity of greater than 15%. Following a self-described "Margin of Safety" credo, he also looks for a stock price that is far below what a rational investor would pay for the company. Once purchased, stocks are generally held for the long term, as illustrated by the fund's low 28% average turnover.

inception in October 1986

Managing the funds in his spare time

ice-president at Toronto-based Fairfax Financial Corp

He has only a grade 12 education and used to labor as a Bell Canada repairman. He has never worked for a big bank or a mutual fund company.

best mutual fund manager in Canada

the first rule is that you can't really know anything if you just remember isolated facts and try and bang 'em back. If the facts don't hang together on a latticework of theory, you don't have them in a usable form.

Buffett, whom I've worked with all these years, is that he automatically thinks in terms of decision trees and the elementary math of permutations and combinations....

A book by Katrina Firlik called Another Day in the Frontal Lobe: A Brain Surgeon Exposes Life on the Inside. It's basically an inside look at what it's like to be a neurosurgeon and a little bit about the brain. Upcoming books are The Halo Effect, by Phil Rosenzweig, and The Difference, by University of Michigan professor Scott Page. It's about diversity theory.

A Random Walk Down Wall Street."