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Chou RRSP Fund's Top Stocks Also Trading At Low P/E

In his annual shareholder letter , Chou RRSP Fund ( Trades , Portfolio ) manager Francis Chou (Trades, Portfolio) singled out six stocks that contributed to the fund's 14.2% return in Canadian dollars, compared to the 10.6% return for the S&P/TSX Index. Coincidentally, three of these stocks - Torstar Corp (TSX:TS.B), Ridley ( RCL ), and Canfor Pulp Products ( CFX ) - are also trading near the low end of their historical P/E range.

The fund owns 1,259,416 shares of Torstar Corp, which accounts for 9.2% of the portfolio as of the fourth quarter.

Torstar is a media and book publishing company. The media segment publishes four daily newspapers: The Toronto Star , The Hamilton Spectator , the Waterloo Region Record , and the Guelph Mercury . The stock currently trades at C$6.77, with a P/E ratio for the trailing 12 months of 3, and P/S ratio of 0.63.

When comparing the stock price to the Peter Lynch earnings line, the stock appears to be undervalued.

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Of the stocks trading at low P/E ratios in the fund's portfolio, Ridley has the largest portfolio weighting at 10.7%. The fund holds 313,200 shares, which has remained unchanged since Q2 2010. The stock price has increased to C$33.87 from the initial purchase price of C$8.68, helping the fund realize a 290% gain.

Ridley's P/E ratio for the trailing 12 months is 14.8, near the low-range of its history, which has seen P/E rise up to 81.7 during the past 10 years. The current P/S ratio is 0.59.

Ridley is a livestock and poultry feed manufacturer with operations in Manitoba, Alberta, Saskatchewan and Ontario.

The company's operating margin has been increasing steadily at more than 32% over the past five years. In 2014, the margin was 5.69%.

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The Chou RRSP Fund (Trades, Portfolio) also owns 493,900 shares of Canfor Pulp Products, which is trading at a P/E ratio of 11.8, near the low end of its history. In 2012, the P/E ratio was as high as 61.57.

The stock has been up 32% over the past year, and the fund has seen a 61% gain from the position. Canfor is a supplier of pulp and pulp products with operations in British Columbia. Its products include bleached and unbleached high performance kraft paper, high-porous papers, and others.

Canfor is currently priced at C$14.75, and when compared to the Peter Lynch earnings line, appears to be undervalued.

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Net income in 2014 was C$89.5 million, up from C$41.8 million the year before. EBIT per share in 2014 was C$1.77, an increase from C$1.04 in 2013. The current dividend yield is 1.7%, while the payout ratio is 19%.

View the complete portfolio of the Chou RRSP Fund (Trades, Portfolio) here. Not a Premium Member of GuruFocus? Try it free for 7 days.

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This article first appeared on GuruFocus .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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