Chou Associates Fund reported that its Series A net value asset per unit (NAVPU) increased 12.1% to CAD$124.19 by the end of 2014. The Fund’s Series A unit in U.S. dollar was up 2.7% by the end of the year.
According to Francis Chou, the weakness of the Canadian dollar against the U.S. dollar boosted the performance of Chou Associates Fund last year. Chou noted that one U.S. dollar was worth CAD$1.06 in 2013 compared with CAD$1.16 last year.
Based on its annual report, the total assets of Chou Associates Fund were approximately $558.64 million, and it has around $1.82 million in liabilities. The Fund’s net assets attributable to unitholders of redeemable units were around $556.82 million. Its net assets attributable to unitholders of redeemable Series A units were approximately $513.81 million by the end of 2014.
The NAVPU of Chou Associates Fund Series A was $132.93, and its cash position was around $26.1% of net assets as of March 16, 2015.
Other contributors to Chou Associates Fund performance
Aside from the weakness of the Canadian dollar, Chou said the equities of Berkshire Hathaway, Goldman Sachs, International Automotive Components, and Wells Fargo warrants also contributed to the Fund’s performance.
Sears Holdings intrinsic value lies in its real estate assets
Chou Associates Fund owns 896,096 shares of Sears Holdings, 1,322,209 shares of Sears Hometown and Outlet Store and 482,319 shares of Sears Canada by the end of 2014 based on its annual report.
According to Chou, Sears Holdings is a “misunderstood story,” and its “intrinsic value lies in its real estate assets.” He noted that the struggling retailer has other valuable assets including Kenmore, Craftsman, and Diehard.
Sears Holdings is in the process of changing its focus from operating brick and mortar stores into a business that offers value to consumers in the most convenient way.
Chou emphasized that Eddie Lampert, the CEO and controlling shareholder of Sears Holdings could implement the necessary changes using the value of the company’s real estate assets.
Chou’s comment on Sears’ REIT transaction
Chou believed that Lampert’s transformation efforts were the “right thing to do.” The company will be a “multi-bagger” if it the transformation works out as expected.
He is confident that Chou Associates Fund would not lose money in its investment in Sears Holdings because the value of real estate assets is high enough.
“If real estate was the only play from Lampert’s viewpoint, it seems that he would have liquidated the company a long time ago,” noted Chou.
Sears Holdings plans to raise $2.5 billion by creating a publicly-traded Real Estate Investment Trust (REIT), which will acquire around 254 Sears and Kmart stores.
The company already filed the first set of its paperwork for the initial public offering (IPO) of the REIT. It also entered into a real estate joint venture with General Growth Properties.
According to Chou, “after the REIT transaction, you will be betting more on Sears’ retail transformation, ostensibly called as ‘SHOPYOURWAY’. If it doesn’t work out, Lampert will be called ‘LOSTYOURWAY’, and so will be the investors who are still holding the stock.”