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.
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%.
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.
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%.
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