Valeant Pharmaceuticals (VRX.TO)

Still a little dubious. Thinks they will survive, but they have to meet some requirements, or one of their bondholders will pull the trigger on them. They have built up such a difficult background to get through. Also, thinks their game plan of using their stock to make acquisitions is in question. Have a lot of debt.

This is like the perils of Pauline. Nobody knows how it is going to turn out. There was a story today that a big creditor was putting out a default notice. Healthy companies do not have this happen to them. The CEO has been subpoenaed to appear before the U.S. Senate committee, and their practices are going to be under great scrutiny. Makes its money by buying drugs and then upping the price by 100%, 200%, 500%. They are saying they are not going to do that anymore. $30 billion in debt. Risks far exceed any benefit.

(Market Call Minute.) Doesn’t like battleground stocks. There has been a world of hurt trying to understand what their business is and what they have or haven’t done. Price momentum is terrible and valuation isn’t there yet. Fairly expensive despite the decline.

In January he said it would be a good short. There are multiple problems right now and he would avoid it. Will they break their covenants? If they do, the banks will probably force them to sell assets. They are probably going to get dropped to CCC credit rating. The cost of debt will probably jump from 6 to 15%. They don’t have pricing power.

It is not the kind of company he would normally look at. He does not like expensive acquisitions with expensive levels of debt. They attracted politicians’ attention with their practice of increasing drug prices.

There is a technical rule on spikes. There is a head and shoulders pattern suggesting downside is on the way. Usually it takes 2 or 3 years to correct the damage. Does the price lead the fundamentals? He can show you that they were in trouble before the last torpedo. The technicians knew the 50% sell off was coming. In many cases you cannot avoid them. This was a case where you could avoid it.

Short to $5? He wouldn’t want to own this company here. The issue is that it becomes much more difficult to Short or go Long the stock at these levels because you don’t know anything about the company. There has been no clarity given. It is very difficult to understand. The CEO is supposed to be gone and the CFO, who has done something wrong, is staying. There are a lot of issues. From what he has read, this company has some legitimate businesses, but Shorting at these levels is a tough call for him. He would just stay away from this. You may want to consider looking at the debt which is trading at around $75.

The company says the financial statements should not be relied upon. They have $31 Billion in debt and the company is worth $9 Billion. 2020 -2022 is where most of the maturities come. You have the overhang of Ackerman holding 9 percent of the stock. The stock could have counter-trend rallies. If Hillary wins there is another consideration around these pharmas in the US. This is a stock for traders not for investing in yet.

This is going through value restatements, and going to release even more. If you can trust the numbers that are there, it is an impossible type of valuation work. He would stay completely away from this.

A very tough situation. It highlights something that is always important to remember i.e. when you make an investment, you look for something that fundamentally makes sense and where the numbers support your investment. You try to buy things that are changing for the better. If your fundamental picture is getting better and the price is behaving otherwise, you have to question your assumptions. He has a big belief in using stop losses. Once a stock that has been in favour falls out of favour, you have an army of people just waiting for an opportunity to Sell and get their money back on any kind of a rally. This company has something like $30 billion in debt, and the equity is evaporating. Buying a stock like this is like picking up a dime in front of a bulldozer.

(A Top Pick Feb 5/15. Down 56.52%.) The story is not over yet. Everybody is waiting for this quarter. This is part of the business of investing. Sometimes you get them right and sometimes you get them wrong. If you own, continue to Hold.

Couldn’t understand their business plan in terms of how big the acquisitions had to be to make any sense in terms of growing earnings. Looks a lot cheaper now, but they are under investigation by the SEC. They have a great big target on their back as far as the US is concerned.

When Warren Buffet gets companies he builds them. When VRX-T gets companies they throw out the R&D and it does not work in the long term. He doesn’t want anything to do with this company.

Another problematic story where it was a reasonably expensive stock. They were making acquisitions and making them accretive. Then there were general questions about pricing in the sector, and the stock crashed. Now the stock is too cheap to be used for making acquisitions. If you can’t make acquisitions, how do you grow a company that was relying on acquisitions? She would not own this.

(Top Pick Mar 19/15, Down 51.28%) You should have a stop loss on any stock. There were concerns that drug prices would have to be reduced, they have reduced R&D spending, the CEO has health problems, short selling and there were concerns with their relationships with insurance companies. He thinks there is a good opportunity for the company. It could be re-acquired when things settle out later this year.