Valeant Pharmaceuticals (VRX.TO)

He would just watch what is going on with the takeover. They are doing an all stock offer. The company being taken over is trying to smear the stocks of VRX-T.

The outlook on this is very murky. Their underlying business is fantastic. The potential merger with Allergan (AGN-N) has so many crosscurrents with the trading going on, it is really hard to get a handle on where the stock goes in the short term. If there is some finalization with this, he will probably look at investing in it again.

When M&A activity happens, he backs off because he is not an expert at evaluating it. Technically, it has pulled back and could be interesting.

It has nothing to do with the seasonality. It has to do with taking over a major company. Underperforming the market, in a down trend and broke its moving average. Technicals are against you so avoid it.

He looked at this on a “point and figure” chart and it had a breakdown, which he always respects. Chart shows a descending triangle and then it has broken out of the bottom, which is never a good thing. They could rally up to the breakdown and then fail again. If you own, he would reduce into that rally.

Has been very disappointed with this acquisition activity. He has a problem with the way it was done. We have some real resistance in this area. This is a really good time to buy it here.

He is continuing to Hold, and if it came off a little bit more, he might add to his positions. A terrific story with good growth prospects ahead of it.

(Market Call Minute.) This is not without risk, but it is cheap. He thinks they get Allergan (AGN-N), but even without this it is a Buy. This is not a long-term hold. The rate they are going on acquisitions and the debt they are piling up it will reach a point of slowing down, but for now it is cheap, cheap.

Healthcare stocks like this normally do very well in the summer. However, take over events are clearly having a direct impact on the price of the stock right now. Chart is showing a downward trend, and is underperforming the TSX, and below its 20 day moving average. He would not be an owner of this right now.

Doesn’t own this because it doesn’t have the discipline of paying a dividend. Has historically grown by acquisition. To him, capital discipline is really important when he is making long term decisions on investing for his clients. Feels it doesn’t have a good, solid business strategy that would historically tell him what they are going to do, compared to what they said they would do.

Likes the company very much, and was thinking about making it a Top Pick today. The company has developed so many products. Also, it is a company that likes to acquire other companies. He has an issue with the whole Pershing Square situation.

This doesn’t fit into his investment style. It is nowhere near a value stock. Earnings are from existing companies and then they go out and buy their earnings growth through acquisitions. They do this by reducing or eliminating the R&D expense. Eventually they run out of targets. He prefers companies where he can see where the earnings growth is going to come from.

The “growth by acquisition” story is messy and complicated. At some point you get pharmaceutical companies that ask for more and more, and the accretion gets less and less. He is not a fan of rollup stories. He wouldn’t own this one as a rule.

A bit of a soap opera with AGN-N acquisition offer. It is going to be a bit of a tug of war. His biggest concern is that the tax structure is off-shore and perhaps would be challenged by US. Smart management. It is expensive and he has not chased it, but wishes he got it much earlier.

(A Top Pick June 24/13. Up 44.32%.) Making a bid to acquire Allergan, and hopes they get it. The stock is kind of stalling until this gets played out.