Concordia International Corp (CXR.TO)

Sold his holdings over a year ago. Has looked at it, but just doesn’t want to go back into it again. There is a very high debt level. They were making acquisitions when their currency was much higher. He doesn’t like companies that have a lot of debt.

It fell out of bed in the later part of 2015. There is one piece of encouraging news. It is bouncing off a low point right now. The peaks are getting lower while the trough is remaining relatively flat. Watch for it to break out.

If Hillary gets in as president in the US she will come down on a lot of these companies so for now you have to wait. At $25, risk reward may start to improve.

Has never been a big fan of serial acquirers. An issue he had with them a few years back is that they didn’t have enough stocks in the portfolio. In Nov/15 they made a major acquisition of AMCo, which seemed to diversify their portfolios to the extent that you are not taking drug specific risks. He decided to sit back to see if they could absorb this and grow the business. There has been a backlash against some of their drugs, particularly in the UK.

It is stunning how cheaply the stock trades. There is a big Short interest in it, with people saying things that are not truthful. The company is affected by its British exposure, but it has a lot of natural hedges in place. They are going through a sales process. It has been speculated that there are a number of different players interested in it. Valuations are very compelling. A big, free cash flow machine that is more than capable of servicing it’s debt.

Acquired AMCo last year. AMCo is probably not well understood in Canada. It was in generic drugs as well as prescriptions. Paid a lot of money and got a lot of debt. The question is whether the acquisition will pay off for them over the course of the next few years. Feels it could be treading water for a while until there is clarity on what AMCo is going to look like and what is going to happen with respect to the UK and their investigation into drug pricing. They are under a strategic review, and the Short position is still quite elevated.

After this had broken down to about $35, he felt that there must be some value in it, but now thinks it is un-investable. You have the issue of the very serious headline risk. Not only around this company, but also anything that happens in the sector.

He held it. He looks at technicals. It triggered a sell for him around $86. They meet his criteria of 3 years of RIO above 20%, but their leverage is high. They stumbled on difficult times.

(A Top Pick March 3/16. Down 29.31%.) This has been a bit of a wild ride. Their most recent earnings release was pretty good. They delivered on what they said they would. Then the whole strategic review narrative started to take over and 2 private equity firms backed out. The valuation shows this is cheap as it can be at 3.5X forward earnings. They have positive cash flow and growing revenues and a global footprint, but are trading at such a cheap level.

Unfortunately, this gets compared with Valeant (VRX-T). They are not as dependent on price increases. The negative is that they did bite off a big chunk of debt to buy AMCo. Last quarter was the 1^st full quarter with AMCo in their results. The numbers were okay and the margins were good at close to 80%. If they can demonstrate that they are going to take the free cash flow and pay down debt, that is going to be a great thing. Dividend yield of 1.33%.

It is not fair, but this company moves in lockstep with Valeant Pharmaceuticals (VRX-T), and is a very different company. Have about 60 new products coming on stream that specialize in particular treatments, that don’t have a whole lot of widespread diseases, but very acute and very specific ones. Trading ultra, ultra cheap, at about 5X on a cash flow basis. Over the long-term it could possibly be a takeover target. The biggest “if” and the biggest “risk” is the amount of debt they have on the balance sheet. Their recent acquisition of AMCo of about $2 billion, took their net debt to EBITDA ratio to 20X.

The story is holding together really well with the big AMCO acquisition they did last year and 60 new products coming out in the next couple of years. The core business is doing well. They have some orphan drugs. Stock is trading basically at 5X earnings, 7X Operating Cash Flow. They will generate free cash flow and pay down the debt, and at that time the multiple starts to go higher. Dividend yield of 1.3%.

Believes this is deep value here. Has been extremely volatile with lots of noise, but you have to look past a lot of that. You have to monitor it very closely. Trading at less than 4X earnings and around 9X on an EB to EBITDA basis because they brought a lot of debt on for the AMCO acquisition, so it is a pretty cheap stock, especially when you consider all the free cash flow they are going to generate.

Very volatile. In the very short term it has been a positive, in that the large acquisition they made was in Europe. Now with the BREXIT vote coming, that is a bit of a factor. There are comments that this may be taken over, but it may not be until after BREXIT. Right now it is a trading vehicle and it seems to be on the cheap end. There is a lot of Shorting on it.

A higher risk name in that that they grow through acquisitions. Last year they did a big acquisition that is going to change their geographic exposure, making it much more international. Have taken on a lot of debt to fund that acquisition. She’d rather wait and see how things progress.