Investment Q&A

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.

Q: I will use Valeant as my example. When someone attacks your stock
And it is in serious decline why not call a news conference immediately. Refute the claims and announce a huge share buyback and have the short sellers squeezed.

Why do you not favour short sellers?

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.

Q: Could you please give me your top two recommendations for each of the following sectors: consumer discretionary and consumer staples?

Q: Would there not be an opportunity cost by buying Knight now instead of a couple of years from now, since you keep saying that it is a five year investment, thanks?

Q: What you you consider to be the three best oil and gas stocks right now for someone who does not hold any?

Q: I was reading the latest TD analyst report (dated Oct. 22, 2015) regarding CXR and was a bit frustrated that they significantly lowered the price target not because of the earnings expectations for the company but on overall sector valuations/conditions (I would say this was primarily driven by Valeant). It seems the report was reacting to recent market events (which can quickly turn around) more than anything else, and doesn't seem to take into consideration that there will be a guidance announcement this coming Monday Oct. 26. Thoughts?

On a side note, is there a way to obtain all analyst reports for a security without paying an exorbitant amount? I have access to TD reports because I trade through TD Direct Investing but not much else.

Q: Is there an equivalent with lower fees?

When I renew before Dec 1 will my subscription still go to April?

Q: i do not own valeant or concordia-- i do own knight, crh and some others,but the article by ryan modesto on valeant leaves out the key point of this whole debacle--- this negative post by the short seller brought down the whole healthcare space across all spectrums and this to me is what the jason donvilles are really raving about-- it is totally unfair and wrong. i side with donville 100 per cent, this type of sensationalism and negativity must be eliminated. even if the short sellers post is true, it represents about 10 per cent of vrx revenue, which begs the quesstion should the whole healthcare space have been hammered the way it was?i think not,scary stuff.post if you want. dave

Q: Just a comment on Tim comments re VRX on 0/24.Agreed.However,in my humble opinion,it is very difficult for investors to comprehend everything especially on a complicated co.So that's why we depend on Peter,Ryan & 5I Renewal due in 2/16.If I renew 2yrs prior to Dec 1,I get discount as per blog.Does that mean my new expiry is 2/18? Appreciate your great services & view

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.

Q: For better diversification of my portfolio, it has been recommended that I invest in a couple of US ETF's. John DeGoey, who was speaking recently on BNN, thought that the Canadian/US dollar is probably at its lowest point. He suggested that Canadians should buy hedged ETF's to take advantage of the future increase in the Canadian dollar. Would you suggest that I buy Canadian dollar hedged ETF's for US consumer staples and utilities at this point, then switch to US dollar ETF's when the currency ratio is more favourable? And if you think this is a good idea, what hedged ETF's would you suggest? Thanks!

Q: Hi team-

Is there a healthcare REIT geared towards senior housing that you currently favour? I am looking for one that:

- is a good (extremely) long term hold.
- has quality management.
- distributes a decent payout that is raised annually.
- is currently not expensive.
- will hold up reasonably well in a rising interest rate environment.

Thanks.

Jim

Q: This is not a question, just wanting to share part of my investment risk mitigation, which might be relevant in a case like VRX/CXR.

Although 5i is not a big fan of stop loss orders I have always used them. iTrade has a wonderful alert system created by Recognia.

An example of how stop losses saved me a small fortune is that using the Recognia stop strategy, I sold my CXR at 98.50 and my VRS at $278 Cdn.

I repurchased CXR Friday at $39.

There are many instances I do get stopped out and I determine why. Eg news, volatility, market conditions etc.

If it is not a existential reason I will buy back again once the MACD, volume and support/resistance levels indicate to do so.

Stop losses do help with these kind of situations, as well as major market calamaties like 2008/9.

FWIW.

Q: I thought this post at CornerOfBerkshireAndFairfax does a great job stating what we've been unfortunately seeing in the last few days and is worth highlighting:

http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/valeant-pharmaceutilcals-international-inc-(vrx)/3200/

"How to crush a stock in a few days 101:

- Pick a vulnerable company that has uncertainty surrounding it for whatever reason. Make sure the company is complex enough that it will take time to clear the air.
- Start shorting the stock
- Put out a hit piece, spread internet rumours, make a comparison to Enron for good measure (point out a couple of similarities and not the million differences), make a mountain out of a molehill
- Because there is already uncertainty out there, your message will get traction from traders/the media and make weak hands sell
- Do this in a coalition with your hedge fund buddies, who also short the hell out of the stock
- Selling begets selling, momentum day traders pile in, margin calls result in more selling
- Market panic is successfully created and stock gets crushed
- Enjoy the profits

On one hand, this creates opportunities but it really undermines the credibility of the capital markets. You could do everything right in your fundamental analysis and get crushed by unethical people who would shout fire in a crowded theatre."

Post at your discretion.

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

Q: Hi
I already own some CUS and would not mind adding to it at these prices since the offer from SPB (at 0.153 shs.)seems to be a lot higher than the present $1.40 for CUS. Am I missing something here? Thank you for your invaluable service. H.

Q: The video on BNN's website titled "Valeant Agitator Citron is a Nevada Turkey" should be required viewing for every retail investor and even more so for members of the financial press. The events that have transpired regarding Valeant in particular, and other healthcare stocks by association in general, has put the spotlight squarely on an uninformed media giving credibility to an unknown source and on the market regulators who have failed investors by allowing anyone to say anything without accountability or recourse. Investors who sold their shares in a panic and are now watching prices snap back have lost a fortune, in percentage terms regardless of the size of investment, because the people who should be looking after us have let us down. Similarly, I credit BNN for taking the well-deserved heat from Donville, but they have failed their viewers by raising the profile of an unknown report without checking the facts. They may defend themselves by saying they want to provide both sides of the story but when one side has no accountability and can say whatever they like, short the stock before they say it and share the report first with other funds so they can add to the short position thereby accelerating the price drop and ensuing panic, and then publicly release the report and smile while the hyper-competitive media outlets scramble to get the fact-free news out first that they overlook their number one obligation to investors when they publish unchecked information. BNN is definitely not alone here. Major Canadian newspapers have run the same stories.
Thank you Jason Donville, for standing up for us!!

Q: I thought your readers may be interested to see Jason Donville's response to the short sellers of Valeant:

http://www.bnn.ca/Video/player.aspx?vid=733570

Some harsh words against the unregulated short market.

Q: GUD is apparently well positioned. They have money and they have the skill set. Waiting for it to move is seemingly like waiting for Godot. When do you think they might pull the trigger with the money they have and make and investment? See you at the show.