Valeant Pharmaceuticals (VRX.TO)

It is hard to determine a good entry point. They are repositioning to be an organic grower. She does not have a clear sense of their strategy. There is a lot of goodwill and debt on their balance sheet.

A real toughie. It has lost a tremendous amount. Looking at the earnings that analysts are projecting, he would probably say it has a 200% upside, which makes it look pretty interesting. The issue is, what is going to happen when they undergo some of those US hearings they have been threatened with? Are they going to escape, or are there going to be massive penalties? The balance sheet is nothing to write home about, as it is full of goodwill. No matter how attractive these companies are, he generally avoids them. They are too risky for his blood.

This is going sideways, but there are still some unanswered questions. An extra cockroach seems to pop out every once in a while. Also, if Hillary gets elected, this company just might have some problems. A high risk situation.

When there are really popular stories that are headline grabbers on both sides of the border, you need to step back. It is going to take a long time for serious money to come back to this name. He doesn’t see what the catalyst is to get the cloud away from the name.

(An update from Jerome!) (A Top Pick Feb 8/16.) Short. (A Pairs trade with a Long on Mylan- MYL-Q). It went down about 50% in one day, and he figures it doesn’t get better than that, so he covered this at $50 on March 15/16.

Had owned this, but sold it when it got near its highs. He would be nervous about this now. It has big litigation risks, and has become the poster child for all sorts of things that it may or may not be guilty of.

On the way up, people kept asking about this stock all the time. He was always dubious because when a company is doing so many takeovers, often they get into trouble. They have about $30 billion in debt with about $40 billion in Goodwill and intangibles. That is going to lead to a lot of write-downs. They have problems with government regulations, legal problems, huge debt load and certain morality issues. He can see this possibly going bankrupt.

At the time, this was a compelling pitch. You were buying drugs that were mispriced and were making a lot of money. It is really difficult when looking at a highly leveraged company like this to justify a turnaround. They are going to have to reduce debt and sell off some assets. In the meantime, the regulatory environment is not very favourable at all.

The stock made a very, very significant top in 2015, and he is not sure that we have seen the bottom. Prices are hovering around the lows, which means sellers are persistent, and strong buyers have not emerged. He wouldn’t touch this with an 11-foot pole.

(Market Call Minute.) Not interested.

A company that is attributed with everything that is wrong with the healthcare Index in Canada. It represents an extraordinarily high amount of the healthcare Index at 50% or 60%. Believes they have possibly turned over a new leaf. However, the stock has also been reset. It is possible they can get to $40 which would give a 29%-30% return, but you have to have the stomach for it. 2^nd quarter results showed a sequential improvement with earnings per share at $1.40. He would treat this as a trading stock.

(Market Call Minute.) This company has lost all faith of investors. You can’t trust the financial statements.

He can only comment on this from a technical perspective, because there are so many things that are changing from the fundamental side and value. Looking at valuations, the stock is cheap trading at 4 or 5 times earnings, but are those earnings accurate? Technically, it looks interesting. Since March it really has traded in a very flat basing pattern. Normally that means it can perform going forward.

This is not really overvalued. It is a situation that is trading at distressed levels. There were questions as to whether or not the company was going to run into debt default problems, and whether or not it would manage to stay as a going business. There have been lots of concerns and lots of Short stories against it. This is a rollup company that did its last couple of acquisitions using debt, and ended up with a lot of debt. Had some problems with regards to a related pharmacy distribution company. It is really, really cheap down here, and thinks it is going to slowly recover. To bet against this company at these levels is a tricky thing to do.

(Market Call Minute.) She would not be buying this. Very low earnings visibility. They problems in the US are still unresolved.