Valeant Pharmaceuticals (VRX.TO)

An acquisition driven story. Instead of organically doing their R&D, they buy their R&D. With all their acquisitions, there is a lot of restructuring so it is difficult for her to get a handle on what their actual growth rate is. Trades at a pretty high multiple. It’s a momentum stock, so as long as they can keep the acquisitions going, their adjusted earnings keeps growing.

Management is looking for more acquisitions and wants to see 40% growth. The market now believes the growth story. Very positive story and there are no signs as yet of the story crumbling.

Stock has done very well. Has never owned this as she is more of a value driven investor. Not interested in this because it is very acquisition driven. Very difficult to follow the financials of this company.

Beautiful chart. There is confidence in the company and how consistently they are growing their earnings. You can have your growth and still sleep at night.

You are not early. It has been on a tear for a couple of years. If the trend is strong then you can stick with it. Unless we trade back below $100 then the trend is still up.

(A Top Pick Aug 21/12. Up 112.59%.) Grow organically and by acquisition. Reasonably priced. Has a 28% trailing ROE and is forecast to grow by about 75% to 49% in 2014. Ability to cover their debt is pretty good. Earnings are expected to grow by 38%.

A “growth by acquisition” type story. His view is that those acquisitions have to keep coming. Given their latest acquisition of Bausch & Lomb, they have been borrowing a lot of money and he questions when, not if, this is going to end. Would be very cautious on this. As interest rates go up, their costs will increase.

(A Top Pick September 21/12. Up 101.11%.) Made several acquisitions since his recommendation. Same-store sales are up about 8%. In the past 5 years this company has made 40 acquisitions. A fantastic company. They are cornering the market in 2 health areas where basically there is no regulation. Skincare and eye care.

This has been a wonderful performer in an otherwise difficult Canadian market. Healthcare and Pharma has been a great group to be in. Have really focused on being a very strong distribution business and have added additional products to their shelf. As long as the group remains in favour, there are going to be people who want to own this company.

Likes their Bausch & Lomb acquisition. Thinks it is a lot easier for these companies to grow through acquisitions then it is through R&D.

(A Top Pick Sept 21/12. Up 44.85%.) Still likes. Have 400 different products and not one of them is more than 10% of their revenue. They are controlling the dermatology industry in North America.

Takes advantage of more of the emerging markets and the US as opposed to just Canada. Has been on an acquisition spree. Growing their revenues through acquisitions. Biggest dermatology player in North America. Organic sales growth has been strong at 9%-10%. Trading at about 12X earnings.

New CEO. Have made 50 acquisitions in the past 4 years. Now have 400 different products of which, none of them, have more than 10% market share for the company. They are going to be the predominant dermatology globally. Really, really strong market segment.

It is now a combination of Valeant and Biovale, who had a very interesting tax structure that Valeant is now taking advantage of. Earnings growth 60% in 2012 and 8% in 2013. At 10.5 PE now, if it goes from $52 to $60, the PE would be 13-13.5 times. 7% free cash flow yield. Grows by acquisition. He owns in funds.