Valeant? VRX

I could only imagine what would have happened if Valeant had issues with safety disclosures like the other pharma companies did. The shorts and the NYT would be calling for the public hanging of the CEO
 
Daal said:
The media and the shorts have blown the problem out of proportion and this lead to a large mispricing in the stock price. VRX can handle pretty much any fine that is thrown at it using its liquidity, cash flow generation and $1.5B credit revolver
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Yup it looks to be an opportunity, the proverbial "mis-pricing"
 
Daal said:
Here are the slides which to me has pretty much destroyed the short argument (unless you are talking about a day trade)

To me the key phrase no one is talking about is the 'Valeant is notably absent from this list'. Essentially you have all these shaddy pharma companies doing bad stuff over and over again but no one talks about it. But when Valeant did, the entire world has blown the issue out of proportion. Yet, the fact shows that Valeant is actually one of the least corrupt companies. You have all these companies having issues with safey disclosures, we are talking about stuff that might kill people. That's not what Valeant did. If anything, they are actually trustworthy compared to the rest. The media and the shorts have blown the problem out of proportion and this lead to a large mispricing in the stock price. VRX can handle pretty much any fine that is thrown at it using its liquidity, cash flow generation and $1.5B credit revolver

I plan to buy the stock monday unless the shorts come out with something REALLY strong
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I (think I) understand your thesis, however:

(1) "Past performance is not a guarantee of future performance".

What if regulators decided to take a harsher stance with VRX than other drug companies? For example, as I've posted previously, what if VRX was fined $1 million per instance of wire/mail fraud, and had a fine measured in several billion dollars?

(2) More importantly, this isn't just about the insurance fraud concerns, it's about the change to VRX's future earnings.

2a: With a lower stock price, its ability to grow earnings via acquisition seems diminished or even
eliminated.

2b: Lower earnings due to severing ties with Philidor.

In any case, due to the high volatility the stock has experienced, and could continue to experience this week, it's entirely possible the stock could provide profitable buying opportunities, just based on an oversold bounce, and nothing else. The stock was as high as $127.08 on Thursday, 35% higher than Friday's closing price. If it got back to $127.08 this week it would be difficult to determine if this was based on an oversold bounce, or based on fundamental factors.

Disclosure: no position in VRX

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m22au said:
I (think I) understand your thesis, however:

(1) "Past performance is not a guarantee of future performance".

What if regulators decided to take a harsher stance with VRX than other drug companies? For example, as I've posted previously, what if VRX was fined $1 million per instance of wire/mail fraud, and had a fine measured in several billion dollars?

(2) More importantly, this isn't just about the insurance fraud concerns, it's about the change to VRX's future earnings.

2a: With a lower stock price, its ability to grow earnings via acquisition seems diminished or even
eliminated.

2b: Lower earnings due to severing ties with Philidor.

In any case, due to the high volatility the stock has experienced, and could continue to experience this week, it's entirely possible the stock could provide profitable buying opportunities, just based on an oversold bounce, and nothing else. The stock was as high as $127.08 on Thursday, 35% higher than Friday's closing price. If it got back to $127.08 this week it would be difficult to determine if this was based on an oversold bounce, or based on fundamental factors.

Disclosure: no position in VRX

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1. That's possible, but when a stock is in a panic people will get emotional and overestimate that chance of that happening. Furthermore a lawsuit that is not settled (your scenario) is likely to take even longer than one with a settlement (due appeals, etc). So we are talking about 4-5 years in the future. In the mean time the company will continue to produce cash

2a. IIRC VRX only did 2 acquisitions with stock over the last few years. Its not a major part of their business model. If you recall VRX didn't get AGN exactly because their stock was undervalued and they didn't want to raise their bid. Then someone else came in with the higher bid and got AGN

2b. This will happen. They lost 7% of revenue, but that is fine because they will find alternative ways to ship the drugs they were shipping with phillidor. Those ways won't be as agressive so they wont recoup it all and the growth rate of those revenues will be smaller but all these concerns are already taken care of by the valuation as of now. Thats what some shorts miss, they think they can keep bashing and it doesn't matter where the stock trades at.

The oversold technical position (along with the consensus bearishness) provides an extra return for the investment. No just the company looks good on a valuation basis, it also looks good due the likelyhood of a technical bounce. I'm not saying it will come from $93 (it could come from $81 back to $95) but on average its a good idea to fade extreme sentiment
 
I bought a tiny amount in the after market on Friday but 75 is where my ears perk up and 75 to 50 is where I apply size, should the mis-pricing continue. But I seriously doubt it will go lower, 100-ish is likely about it to build a position.

In my opinion, which is not worth much, I suppose, Left is indeed a short term catalyzer that covers into his reports but not a credible source; conversely the sophisticated investors involved are reliable. Pg 29+ shows some valuation work http://assets.pershingsquareholdings.com/2014/09/Investor-Call-re-Valeant-Pharmaceuticals.pdf,

...& I find that more reliable than a hissy fit from a neurotic individual. Since I am in the business of finding "opportunity", I will position long:D

At the end of the day it is a conglomerate of the various companies (read cash-flows) acquired. Baush&lomb, that is some serious entrenched quality. Company is a cash cow, management impresses me. (New) risk is that somehow the late developments lead to an impairment of those cash flows or more to the point of the growth of those cash flows. That is impossible for an outsider to assess, particularly w/out yuuuuge amounts of work. Fortunately, my friends at Pershing Square & Sequoia, have ;)
 
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I am now small-ish sized long VRX and do not have any particular need for an immediate move. Absent a reversal of sentiment (eg short covering & new participants buying so-called value), the shares should remain at these depressed level for some time & the upside catalyst is most likely to be a slow working earnings news flow revealing strong cash flows and increased ability to deleverage to near investment grade before additional acquisitions.

There are plenty of potential tape bombs left as continued false accusations of improper or illegal behavior are to be expected. I will use those, if they occur, as buying opportunities to build into my ideal position size. Trade time horizon is 2 to 5 years (investment scale)
 
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