giofranchi

Maybe… But long-term bonds are very sensitive to interest rates… Therefore, you must have a very precise opinion about interest rates to hold them right now, especially because their yield is so low these days… And that is a macro judgement imo. Cheers, Gio

Well, if you put together bonds + equity hedges + CPI derivatives (which imo are all “macro calls”), they are simply much more meaningful than their equity portfolio… That’s why I said I don’t like their business right now very much: because so much more capital is devoted to their macro views than to investing in businesses… with the exception, I agree, of high quality insurance companies (here the problem, though, is even high quality insurance companies tend to be rather lousy businesses…). Furthermore, I also believe the results of their equity portfolio is affected by their macro views… In 2009 they bought high quality companies that were subsequently sold way too early… I guess because of “general market overvaluation” concerns… But the old Franklin’s adage: might always be true! And I think I will treat FFH as “ready money” from now on. Cheers, Gio

It seems they are selling for 15 times 2015 ANI. Quite low. The problem is: how will their ANI be affected by the recent mess with Diesel Engines? Any idea? Cheers, Gio Sensata_Investor_Event_Presentation.pdf sensata-sensor-brochure.pdf

Allergan and Humana Announce Research Partnership to Improve Health Outcomes http://www.prnewswire.com/news-releases/allergan-and-humana-announce-research-partnership-to-improve-health-outcomes-300153282.html Imo this is something that also VRX should do... It would be viewed with much less criticism, and it costs practically nothing! ;) Cheers, Gio

KYBELLA® Injection Wins Allure Magazine "Best of Beauty" Award http://www.prnewswire.com/news-releases/kybella-injection-wins-allure-magazine-best-of-beauty-award-300153263.html Cheers, Gio

Of course, I cannot say how this quarter results will turn out to be. But I think FFH’s macro view is proving to be correct. This doesn’t mean I have any view on the CPI contracts… If they ever will turn out to be profitable or not… But I believe it might be useful to have something that zig, while the others zag, in a macro environment of falling prices. Therefore, I have rebuilt a position after selling some months ago. Truth be told, I still don’t like the business of “macro forecasting”, therefore I’ll take a much more flexible approach to my investment in FFH than I had done in the past. Cheers, Gio

FWIW: http://seekingalpha.com/news/2809066-healthcare-ratings-roundup?app=1&uprof=25 Cheers, Gio

Drug Price Demagoguery Could Hurt Patients http://www.forbes.com/sites/matthewherper/2015/09/30/drug-price-demagoguery-could-hurt-patients/?utm_campaign=forbeshealth&utm_source=TWITTER&utm_medium=social&utm_channel=Business&linkId=17484999 Cheers, Gio

Allergan Successfully Completes Kythera Acquisition; Adds Game-Changing KYBELLA Treatment for Double-Chin http://www.prnewswire.com/news-releases/allergan-successfully-completes-kythera-acquisition-adds-game-changing-kybella-treatment-for-double-chin-300152533.html Cheers, Gio

Ah! Ok! I've seen it just now! Thank you, Gio

Liberty, though I believe I already know the answer, I would like to know what you think about the “government intervention” threat. Do you think it is just noise? No real risks to VRX’s cash flow? Thank you! Cheers, Gio

U.S. FDA Approves JUVEDERM® ULTRA XC for Use in Lips http://www.prnewswire.com/news-releases/us-fda-approves-juvederm-ultra-xc-for-use-in-lips-300152336.html Cheers, Gio

Apple Is Building Its Largest Startup Ever http://seekingalpha.com/article/3544246-apple-is-building-its-largest-startup-ever So, what do you guys think about this "Project Titan" Cheers, Gio

First of all, as someone has already pointed out, they have been able to make very profitable use of a lot of debt even when interest rates were much higher than today. Why then would they encounter refi problems? The way I look at it is like an insurance company that, after years of profitable underwriting in a hard market, starts to pay 2-3% its float in a soft market… If they manage to invest that float at 10-12%, will they ever experience serious problems? I don’t think so. Second, VRX has already shown that, if forced to, they can stop buying other companies and GAAP EPS start to close the gap with Cash EPS very quickly! Therefore, yes: I don’t know what will happen in 2020, but I am confident enough that, if necessary, they will be able to post meaningful Net Earnings. My only concern remains government intervention… But, as OM has pointed out, I am probably magnifying it very much, simply because I don’t really know how to judge it. Cheers, Gio

Ok, thank you! Government intervention is something that I really have no clue how to judge… And probably I just got too impressed by how the market received the news… On the other hand, do you know of any other big pharma company which has received a subpoena? I don’t… You remember I have always been concerned about a very high debt load, don’t you? First I thought a very high debt load leaves little room for error… Then I realized Pearson is certainly not a generalist, instead he concentrates on a sector he knows very well, and in which he has been working for decades… Therefore, I thought the chances to commit a major mistake were very small. Now, though, this government intervention threat that I don’t know how to think about… I hope you agree with me that, when you make use of lots of debt, any threat to your cash flow producing abilities is something that shouldn’t be lightly dismissed. Cheers, Gio

Ok, thank you again! Very valid points. I am not much concerned about government intervention for the whole industry. I just don’t see the public being as efficient as the private sector (despite all its flaws)… And in healthcare we really want to proceed as fast as possible. Instead, I am worried about the government meddling with VRX’s business in particular… Just because VRX takes to the extreme things like cutting fat, tax inversion, cutting unproductive R&D, raising prices whenever it can, because it is held by many hedge fund managers, etc. … In other words because VRX seems much more focused on making money than any other pharma company I know of! And I don’t even know how to attach a probability to such a threat… Cheers, Gio

Martin Shkreli Shows Us How Regulation Drives Inequality https://niskanencenter.org/blog/martin-shkreli-show-us-how-regulation-drives-inequality/ Cheers, Gio

I would recommend [amazonsearch]The Patient Will See You Now[/amazonsearch] by Eric Topol to understand how the smartphones have the potential to revolutionize medicine. Imo it is a very interesting read! Cheers, Gio

This doesn’t really bother me: the public sector replacing the private sector as a whole?... No, unless we stop caring about better and healthier lives! ;) I know this is the most widely argument brought up by the bears, but once again it totally misses organic growth, which has been very healthy until now… You might say it will falter, and I say I don’t think it will… Those are two different judgements about the same business: actually, there is no way to know for sure which one is correct… therefore, I guess we’ll have to wait and see! Cheers, Gio

I look for: 1) Great businesses, 2) Managed by a great operator, 3) Predictable businesses, 4) Selling at an attractive price, 5) In order to hold them for many years. You probably think my decision was “hard to follow” because I decided to sell when the price was more attractive… But then you would be totally ignoring point n.3: whenever I think a business loses predictability, I sell no matter what the price… Let’s say I have much more confidence in my judgement about business dynamics than in my skillfulness as an analyst… When I stop understanding a business comfortably enough, I don’t spend much time trying to understand if it is undervalued or not. I sell and look for a business that I think I can predict instead. Period. I hope it is clearer now. Cheers, Gio

Thank you OM! So basically you don’t think “government intervention” might be a serious threat? Is it just noise? How could we be sure? This is not a business judgement… it looks more like speculation imo. Once the government starts intervening, how could we judge what it might or might not do? I just don’t know… Therefore, I am asking. Cheers, Gio

Mmm... Come on! He used the word "self-destruct"... Would you define a 10% compounded for the last 5 years a "self-destruction"... just because it has lagged behind some indeces? ??? By the way, the remaining 12% from the cash flow of my company shouldn’t be dismissed so easily imo: because what I do is basically taking strategic and investing decisions for my company. It is not stock market investing, I know… But it surely is related to the investing process. On this board we often talk about private business investing or real estate investing: well, that’s exactly the right way to think about it. Cheers, Gio

Ahahah!!... I have just cut my investment in half... Very stange way to "keep trying to pump up this stock"! ;) Cheers, Gio

Sincerely, I don’t see how. Once again it is all about organic growth. Until there is organic growth, I don’t see how they should experience a liquidity problem, given that amortization is not a cash expense. What might happen instead is the following: if you are right and lots of their products are not durable, they won’t keep growing organically without investing more in R&D. (By the way, until now they have proven your concern wrong, because they have grown organically without large investments in R&D). The matter here though has never been how much R&D they are going to make, instead it has always been the ROIC they are going to achieve. Their level of R&D will vary in time… And, if justified by a satisfactory ROIC, it might be much higher than it has been until now… What won’t change imo is they’ll keep cutting all fat to the bone, not accepting any waste. This is what sets them apart imo: in a sector that is among the richest and will become ever richer, they are not complacent, but laser focused on ROIC. Period. How to achieve the best ROIC possible? They will be flexible, and do what works in each different situation. Cheers, Gio

So, this is what I have done today: I had to admit I might have exagerated the threat of "government intervention", because of how the market received it. Therefore, I have not sold my entire investment, but I have just cut it in half. And I have bought back FFH. 1) If the "government intervention" is just noise, very well and I might add more even at an higher price. 2) If the "government intervention" really causes some unforeseen trouble, I think I have limited my downside, while hopefully making a good return with FFH. Regarding FFH, it is true my timing couldn't have been more wrong... But in the end I also got lucky somehow, because the market has not recognized yet that FFH's macro thesis has started to materialize. Therefore, I think I can still capture all the upside. Cheers, Gio