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Investment Q&A

Not investment advice or solicitation to buy/sell securities. Do your own due diligence and/or consult an advisor.

Q: Hello team,
In your investment history, have you seen anything like this recovering ever? Is VRX another Enron or another Amex?

Would at any point it make any sense to average down on this basket base? Or would this be throwing money away gain and a second mistake?

Who else could we trust for an honest, experienced, and informed opinion! Thanks!
Read Answer Asked by Saeed on March 15, 2016
Q: In your opinion, is Valeant an outright "sell" at this time? It's going nowhere fast.

In your comment to Gary, on November 6th, you stated:

"The problem is that VRX is no longer trading on fundamentals, but on emotion and rumours. ... it is likely worth (worst case) $100 US. This is not our number, but from a good report from Mizuho Securities looking at worst case scenarios."

Given that the $100 US target price is not your number on the stock, would you nonetheless concur, or would you assess it higher/lower? (I know you don't believe in target prices, but at some point there is the essential value of the company that speaks out, and affirms its fundamental worth.)

For someone with a one-year time frame on this particular stock, do you think it's worth hanging on? I have a 28% loss and it is only 2% of my portfolio. I would like to recover that loss and move on, whether through Valeant or some other means.

(I have other, longer time frames on other parts of the portfolio, but was using this as my "Mad Money Corner".)

With everybody piling on Valeant, including lawsuits, shorters, staff desertions, things are looking pretty grim, and it's no longer possible to assess what is real and what is not.

Would this be a good time to take the "mad money" and run? You have lots of good choices in your growth portfolio, and I was considering turning to one of those.

Thanks, as always, for your great service!

Read Answer Asked by Sylvia on November 18, 2015
Q: I know this isn't a chat forum but I am intrigued by Saeed's question and wished to comment. Perhaps food for thought for some other members. I took a close look at Valeant also, because some of the selling was motivated by fear, and this can represent an opportunity. I chose to pass because:
1) I don't really understand how they are making the profits they report. They buy established companies with valuable products. OK. But what are they adding that allows them to earn so much more than the original owner? It is hard for me to believe that they can continue to grow this fast for very long. Anyhow, if I don't understand the business, I don't buy the shares.
2) VRX response to Citron, to me, was all bluster and obfuscation. VRX never came out and said in plain language that all their sales were absolutely legitimate. Instead they seemed to emphasize that their accounting was technically legal. And, by the way, whenever any organization delays giving answers but instead hires a team to "investigate" themselves....that is a sure sign they have been caught doing something wrong. It is a tactic to delay and hide the truth.
I hope for Saeed and others that VRX wrongdoing is only minor and that the core of the business is legit. Would be good for us all if it bounced back. I'll be on the sidelines though.
Read Answer Asked by john on November 02, 2015
Q: Hello team,
On Monday last week, I purchased a 10% position in Valeant. This was after seeing the videos on BNN on both side and also asking you a question about my decision to do this. I reasoned that I am a long-term investor and I would not touch this money for at least another 10 years. This has not changed. What has made me question my original decision however is the promise of new report that is even worse, further reveals Valeant’s accounting practices, and shall “nail” the company following their presentation last Monday. I didn’t think philidor story could carry that much weight in the end and that is why I bought in. Now, I think where this whole story is going to stop with a masterfully planned report releases to do maximum damage. Would that point be “beyond point of repair” for the company?
I know everything is possible and I know you cautioned me against too much weight here. I made the mistake and I learned my lesson. My question here is how much I have to pay for the lesson. I know that the additional loss on Friday was a response to the news for this Monday release and the damage is already in the stock again. What I am asking here is: should I look away and ignore all of this noise or should I at least try to lower my weighting and reduce my overall losses. I will be still holding the company if it happens to be around 10 years from now.
I think time is the only thing I have on my side as a retail investor. Andrew Left and other short sellers have made their money. Bill Ackman will make money by averaging down. And perhaps, I won’t lose money if I sit still and don’t react at all.
What do you think?
Having you guys at 5i cannot be appreciated enough during such times. Thank you!
Read Answer Asked by Saeed on November 01, 2015
Q: For those who are considering buying Valeant, I recommend watching what a Rotman School of Business finance professor had to say about it today, on BNN. I attribute little weight to many guests that come on BNN, because of conflicts of interest, but Ramy is a professor who I have met and trust. His financial analysis methods are certainly modern and respected. What he said about EBITDA was also interesting/worrying considering how many BNN guests use it to back their ideas. dishttp://www.bnn.ca/Video/player.aspx?vid=736200
Read Answer Asked by Matt on October 28, 2015
Q: This isn't a question, just another interesting tidbit regarding the VRX/Citron drama. Feel free to post if you like...

From Reuters: "Short interest in U.S.-traded Valeant Pharmaceuticals International Inc shares stood at its highest in nearly a year in the first half of October, exchange data showed on Monday, indicating bearish investors were stacking up against the stock even before a negative report torpedoed the shares last week.

Short interest in Valeant shot up to 10.54 million shares, or about 3.1 percent of the stock available for trading, in the period to Oct. 14, according to FactSet Research Systems data cited by the Wall Street Journal.

That was the highest since the last half of October 2014 and an increase of 49.3 percent from the 7.06 million shares, or 2 percent of the public float, at the end of September.

Overall short interest on NYSE stocks declined 2.2 percent during the same period, exchange data showed."
Read Answer Asked by kelsi on October 27, 2015
Q: VRX isn't enjoying CRX's bounce. Is it facing stiffer headwinds because of direct accusations of fraud versus CRX's guilt by association, or do you think there's something else at work here e.g. it's business model needs to change, reducing profits going forward.
Bought CRX on the way down, is that trying to catch a falling knife or dollar cost averaging!! Average price $42, so fairly happy here, at least for the moment. Just wondering if there's an opportunity with VRX at this level or avoid altogether. My sector weight with CXR, GUD, PHM, PLI is 13%.
TGIF and thanks Peter.
Read Answer Asked by Peter on October 25, 2015
Q: I read the link to the Citron report provided here the other day and saw Mr Left on BNN yesterday. Bot the report and the interview revealed, im my opinion, were over-the-top to the point of being cartoonish. Citron's motives are obviously highly questionable. However, I can't help but think that Valeant doesn't own some responsibility for this. Why would Valeant not want to get out in front of this matter sooner? Why has Left done all the talking this week, while we have had so little info come from VRX?
The problem may very well be that Citron is correct in their accusation, and that VRX really wasn't sure what to say about it. It may be a small part of their overall sales, and the Enron comparison may be ridiculous, but it is possible that VRX got caught doing something wrong and can't refute it. That gave Citron a golden opportunity. Maybe we will learn more Monday. Just my 2 cents. Thx.
Read Answer Asked by john on October 25, 2015
Q: Hello team,

First thing on Monday 26 Oct, I am moving to buy 500 shares of VRX. This will account for roughly 10% of my portfolio. I am even tempted to buy 1000 shares depending on your honest answer to the following question:

Is this a one time opportunity to invest in a good company suffering from unfair publicity or is this a moment of greed which has blinded many to see a broken story?

I have seen the interview with Jason on BNN and I am sorry for not buying VRX when it reached 116$....if Jason is right this company is worth north of $400/share. If Jason is honest and I know you respect him a lot, then why should I (or everybody else) hesitate and lose this golden opportunity? Or is he telling us all of this because he is massively invested in VRX and he is looking out for himself first.

I know you don't like target prices but is it even a possibility for this stock to see the light of $250/share ever again.

I know you will refuse my weighting in the company but I am more interested in your genuine and personal trust in the company's management and what the company is doing (borrowing to grow ROE at all costs) as well as your desire to invest in this company after all is said and done...., Today?

Love to hear back from you. I know your long-term investment logic and wisdom are the only thing that could stop me from making a deadly mistake. So thank you in advance.
Read Answer Asked by Saeed on October 25, 2015
Q: Dennis Mitchell gave a more grounded interview on BNN regarding the Valeant - Citron debacle, in my view. In short (oops!) he suggests it's the investor's responsibility to fully understand the business they have bought into regardless of what any research piece, pro or con, says. Further, Buffett would suggest a 'margin of safety' shield any purchase you are contemplating and that volatility can be your friend if you understand the underlying business. Read lots (not just 5i) and take the time to ponder before your purchase but in the end you are responsible for your investments, not the media, not the research firm, not any politicians.
Post at your discretion.
Tim
Read Answer Asked by Tim on October 24, 2015
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