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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: 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.
Read Answer Asked by Arneh 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
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.
Read Answer Asked by Harry on October 24, 2015
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!!
Read Answer Asked by Steven on October 23, 2015
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.
Read Answer Asked by Jim on October 23, 2015
Q: I enjoyed your Small Cap essay. I had to get to pg4 to know which small cap indices you were using. Pg4 & beyond said MSCI, but which MSCI?

Why would you compare a Financial & resource heavy Tsx to ,say, IWO or any MSCI small cap.

You have been a long term IWO advocate. Is there a C$ ETF that would provide access to IWO stocks as VUS/VUN do For access VTI?
Also can you suggest ETFs in any currency that follow MSCI Indices?

I ask few questions, but follow with interest your daily stream. Thanks for what you do
Ernie
Read Answer Asked by Ernie on October 23, 2015
Q: Could you please comment on my sector weightings?
Non-Registered CAD account. Income Bias.
70% Equity
30% Fixed Income

Resource(non-energy)8%
Consumer 8%
Banks 16%
Other Financial (Insur, MFunds, Fintech)16%
Utilities 11%
Telecom 8%
Precious Metals 2%
Energy 8%
REIT 12%
Technology/Industrial 11%

Thank you
Read Answer Asked by Carlo on October 23, 2015
Q: Could you explain, in general terms, how companies like CXR (and I suppose VRX) actually thrive? CXR buys an existing company, but how do they become so successful? Do they somehow unlock synergies to cut costs or increase sales, or is it just price increases? Or is it that they somehow are able to purchase these companies at a great price, and if so, why would the existing owner sell at such a low price? CRX has levered itself to buy their most recent company, but why is this such a great deal? Thanks again for your insight!
Read Answer Asked by Donald on October 23, 2015
Q: Do you preceive that there will be less tax selling this year due to the volitility of the markets for the last 10 months.
Read Answer Asked by Ross on October 23, 2015
Q: Good morning,
I just a few questions about how a company discloses drill results. Assuming they visually see something in the cores before they are sent to the lab, does the company have to disclose what they "think" they saw? This company sent in 173 samples for testing out of 1515 meters drilled. How big would a typical sample be? Last but not least, can a company disclose material news while they are trying to close a financing?
Appreciate your thoughts
Seamus
Read Answer Asked by Seamus on October 23, 2015
Q: hi Guys


Your thoughts on TPK? Do you see any catalysts for share price appreciation? Thanks
Read Answer Asked by Dave on October 23, 2015
Q: Hi guys. I own XLV.us, IWO.us, CXR, SIS, SIA, and PLI all varied weights and losses or slight gains in different accounts for a total weight dropping to 7% and dropping more. My question is do you see any of these as a Sell for the time being (perhaps a year or so)..to be bought back when the sector starts to look better. and freeing up cash for better places to hide. Perhaps GUD??? Thanks for your tireless support! We cant do it without you.
Read Answer Asked by El-ann on October 23, 2015
Q: Huntsman has cratered from an all-time high of $27 and looks compelling now. Would you buy this stock for a five year period?
Thanks.
Read Answer Asked by Steven on October 23, 2015
Q: Having sold my US financials six months ago, I am now looking at re-entering with Lloyds Bank and KKR. The latter pays a very hefty dividend so I will purchase it in my RRSP. What is your impression of these companies and, in particular, the fact that the UK government is or has disposed of their Lloyds stock.
Thank you.
Read Answer Asked by Steven on October 23, 2015
Q: (Hot.us/Bep.Un and Bip.un)Three stocks I am considering. What are your thougts? I already own maybe a 2% position on Bep. I don't own any hotel stock. Under infrastructure I already own some WSP and SNC. Thanks for your great advice.
Read Answer Asked by Shyam on October 23, 2015
Q: Hello 5i Can I get your thoughts on this French company Total S.a. I thought this would be good for some international diversification seeing as it seems to have operations worldwide. It seems to have a low cost of operation and low cost of acquisition, but I am not sure how to read it's debt levels. It's had a nice little bump up since end of Aug. Your views are greatly appreciated.
Read Answer Asked by pietro on October 23, 2015
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