giofranchi

Sorry… But this is misleading… Again… Just take the Q2 2015 conference call transcript and presentation, or Ackman’s valuation of VRX, and you’ll find lots of numbers! The fact simply is: We bulls believe the numbers reported by VRX’s management are true, you bears believe they are false. Moreover: With most companies outside investors simply cannot prove the numbers reported by management. Think of big banks for instance (I have already said you cannot know about BRK either!). Do you really think you can prove anything about a big bank? No, you can’t. That’s why trust is at the root of any business transaction… You must choose who you want to trust, and who you don’t… And you must have criteria that help you choose wisely. Whatever else anybody says is utterly unconvincing. Cheers, Gio

maybe you think it's a "decent" bear case. others are totally unconvinced. it seems like the market sure is unconvinced. I don't think this analysis at all gets to the heart of how much in owners earnings vrx is going to produce next year (estimates $16 a share), which is most important to the stock price. I guess we are supposed to believe that because someone has issues with the way they accounted for a small acquisition a few years ago that the whole thing is a fraud? And meanwhile the CEO owns close to $2b in stock that he can't sell for years. if you have a lot of conviction that this is a fraud and the numbers are funny you can take advantage of that. See that's the thing. Everybody is saying that this analysis breaks new ground; but how many of you have acted on it and sold ALL your stock and or Shorted the stock? Because otherwise it's just noise right? $233 to zero is a looong way down. conviction is putting real money on the line. And the bulls who have billions on the line are not selling. That's conviction. Real money on the line. If you read the Sequoia fund transcripts how many questions are there about arcane points of merger accounting on small acquisitions done years ago? how many questions address the important qualitative aspects of the business that owners need to, and would like to know more about? Do the Sequoia managers even mention that there may be aggressive accounting involved here, something that their shareholders may wish to know about because it's a huge position? no. it doesn't even come up. they are totally comfortable with the accounting treatments here. To expect that an analysis like this is going to persuade incredibly sophisticated investors who have been following every move this company has made for years, that's just silly. Focus on big impactful things that matter. But wellmont! Come on! You should have understood by now that those "important qualitative aspects" of the business are nothing but "stories"...? For what is worth, today I have bought more VRX. Cheers, Gio

So I guess you are saying “trust” has no place in business… Right? Usually, I try to spend lots of time valuing the quality of management precisely because I think that trust is important instead. Outside shareholders have access to information that are never 100% complete. As I have said, I would find it very difficult, if not utterly impossible, to reconcile all those non-GAAP results that VRX management presents to shareholders with their 10-Ks. I would say that insider information is required to do that successfully. Let me ask you: if trust has no place in business, how would you explain the PCP acquisition by BRK? Buffett himself admitted that he had never followed PCP closely. Therefore, either the information he got in a very short time was enough for him, or he judged an idea brought by his two investment lieutenants good enough to deploy $35 billion… In either cases trust is involved. Cheers, Gio PS This being said, I am reading AZ_Value’s post very carefully, like I did with the previous one!

If yours is supposed to be an answer to my latest post, I have never said that and you don’t pay attention. Gio

--Peter Cundill In my experience either you get the “simple, fundamental truths” about a business right, or you don’t. And it has very little to do with 10-Ks… I am not saying don’t read 10-K! I read lots of them, and enjoy doing so very much! There is no doubt they are very useful! But be careful not to let numbers overwhelm you… Businesses have always been founded and made grown upon new ideas, and it will always be so: first get those ideas right (even if someone calls them “stories” mockingly…), then go through the numbers as much as you like! ;) Cheers, Gio

Those founder's shares are a killer, eh? Well, those were to be expected, weren't they? And you already know my view on them. What bothers me instead is the lack of growth... JAH has always grown organically, NHL isn't... It might be too early to judge, but I don't like waiting for a turnaround... Especially because there are other companies which are growing organically, and because I could always get back in when organic growth should materialize. Cheers, Gio

--PSH 2015 semi-annual report Gio

Q2 2015 results are out: http://otp.investis.com/clients/uk/nomad_holdings/rns/regulatory-story.aspx?cid=1103&newsid=563481 Revenues are still declining… Mmm… Despite Ackman’s upbeat view on this investment, I think I am watching from the sidelines for a while… If I see organic growth in the next quarters, I might be buying it back. Cheers, Gio

--PSH 2015 semi-annual report Gio

Personally, I think Liberty is the most knowledgeable member of the COBF board about Valeant. Cheers, Gio

This is something I have come to realize recently, and which has changed my view about the businesses I am really interested in: there must be long term thinking, but I also want to see short term results. I was used to thinking quarterly results don’t matter… but I have changed my mind. Not because quarterly results matter per se, but because a focus on quarterly results (without compromising the long term prospects of the business, of course!) shows a sense of urgency that imo is very healthy. Cheers, Gio

+1! :) Cheers, Gio

Well, then you are suggesting not to invest in a wonderful business, because you cannot prove what the current IRR is? I guess that’s because of the overconfidence in your ability to prove anything about a business you have not founded, you don’t manage, and about which you have no insider information. In my experience we know much less about a business than we think we do. And this is the reason (one of the reasons at least) I always look for a great and reliable manager in the first place. I take results as he/she reports them to shareholders, simply because there is not much else I could do. Analysts who have never managed a business in their life fool themselves thinking they “can prove” anything about a company… because they read “the footnotes”… while other people don’t! After some months managing a true business, you’d understand how fallacious that idea actually is! Also this makes no sense in my experience. It is 10 years now that I own and manage a couple of businesses, and I can assure you that each year I find some new way to cut expenses more or to optimize some processes. And I think it will go on for a very long time! Ah! Once again this is fallacious! Simply because all the shorts are doing is finding some examples they think are suspicious and pointing at them as proof the whole Valeant must be a fraud… To spot something “suspicious” in a company that must provide lots of material to shareholders other than SEC filings, simply because for its business GAAP metrics are not all that relevant, is much easier than to prove the reconciliations between that added material and its SEC filings are correct… A job that without insider information imo is almost impossible to do! But whenever Valeant was asked to provide the evidence that those reconciliations were right, it did so very convincingly. Cheers, Gio

Let me see if I can adress a couple of points here: 1) Multiple expansion: since I started following VRX very little multiple expansion has occurred. Instead, they have grown Cash EPS. 2) The business model: as I have said, they use free cash flow + cheap debt to buy good value, fixing a bloated cost structure, and concentrating on the industry with the best growth prospects out there. Let me put it very clearly: that is the best business model I could think of, and the most reliable in the long run. Debt was a concern of mine... But I have gradually changed my mind: they concentrate on an industry they know very well, and that lowers the probability of a serious mistake very much. At the same time they have chosen what's probably the largest industry in the world (or it will become so in the near future), therefore they have little constrains for growth. If you think you know a better business model, think again: VRX's business model, as I described it "Buffett + Icahn in pharma and biotechnology" can hardly be beaten... That's why decades come and go, companies grow and then disappear, while Buffett and Icahn are always there doing what they do best. Will they keep performing? Will Pearson keep performing? Of course no one knows! Such is business!? Imo it is as simple as this: either VRX is a fraud, or it is a wonderful machine for creating value. Cheers, Gio

But they have! I repeat: just look at AGN, PRGO, and ENDP! Moreover, what they are doing is simply buying good values and fixing a bloated costs structure, concentrating on an industry with huge growth prospects and costs that are notoriously too high!... Therefore, imo it is once again nothing more than "Buffett + Icahn in pharma and biotechnology". Liberty, I get what you are saying. In investing though my experience is that a sound method takes you much farer than in phone making... You remember the super investor of graham and doddsville, right? That's basically the idea: search for value in the best industry possible, and then focus on ROIC as much as you can... You might not get Pearson's results, but something good should still happen!? By the way, that describes AGN, PRGO, and ENDP perfectly imo. Cheers, Gio

Fairfax, Greenlight re, Third Point re, Pershing Square Holdings, Arlington Value & Allan Meecham, Biglari Holdings ('BH') & Sardar Biglari etc. I don't understand: you have made a list of billionaires or very successful entrepreneurs... To prove what exactly?... Of course there is one Buffett, and that's what also Liberty says: there is one Pearson, those other managers who try to do like he is doing don't achieve the same results of course... See for instance AGN and PRGO. But they are nonetheless very successful, because the industry and the strategy are both great!... Just like the managers on your list are successful, though maybe not as much as Buffett! Cheers, Gio

I saw that you said that. But what do you mean? That price doesn't matter? It doesn't matter simply because, if what they are reporting in their quarterly releases and conference calls is true, VRX is cheap today! If they truly are able to get the results they talk about, opportunities out there abound, and they will be able to go on growing for at least the next 5 years. Therefore, the question shareholders must answer is the following: are VRX's power point presentations reliable? Do they report business results that are true? Or, like AZ_Value has said, do they belong to the garbage can? Cheers, Gio So it does matter because the word "cheap" indicates an opinion/judgement on current valuation? I'm confused! If you're not looking at valuation when evaluating your stocks and portfolio in general, you are the patsy at the table. VRX in particular had half the current market cap just a year ago and that is after a 10% drop in the stock. That is just to point out that there are a lot of people with big gains that are likely to sell out when fear hits. People aren't as likely to sell off losers, just look at the average holding period in the '30's for proof! It's a good reason not to be too fond of stocks that have run up a lot lately when you fear overall stock market levels (like I thought you did Gio). But that's just me. I hope you all make good returns with VRX but would personally hedge this. I meant that, if they are truly able to deliver results like the ones they have posted in the last year (when the started declaring organic growth numbers), Ackman's valuation of VRX might even be conservative... And therefore they are cheap! If, instead, they are making up the numbers, valuation doesn't matter... Any price is too high for a fraud, isn't it? What does confuse you so much? Cheers, Gio

Come on! It is simply amazing how people are willing to say the most stupid things just in order to defend VRX ... I understand success, extreme success!, might make lots of people emotionally attached to their stock... But, please... Show a little decency!? Ahahah!!?? Cheers, Gio By the way, Jurgis, you are funny... But would you argue that VRX deal making abilities have been questioned many times now, and each time VRX has turned out to be right? Or would you argue that the FDA is a very conservative institution? If you argue those things... Well, you are funny And I am right!? Cheers, Gio

ccplz, Would I have started the poll, if I were "happy" as that quote means? Happy in that quote means "Satisfied with what is happening"... And therefore no more careful... Do you have the impression I am no longer careful about VRX? Therefore, either you quote things not in the right context, or you don't understand the true meaning of what you are quoting. Gio

Come on! It is simply amazing how people are willing to say the most stupid things just in order to defend VRX ... I understand success, extreme success!, might make lots of people emotionally attached to their stock... But, please... Show a little decency!? Ahahah!!?? Cheers, Gio

Last time I checked the FDA was considered an extremely conservative institution... Actually, I have read many articles in which the FDA was accused of slowing down the development of new important drugs, just because it needs way too much evidence they truly work and are safe and useful! Now, all of a sudden, the FDA is accused of yielding to feminist groups pressure... Come on! It is simply amazing how people are willing to say the most stupid things just in order to attacking VRX... I understand success, extreme success!, might bother lots of people... But, please... Show a little decency!? I will leave it at that. I repeat: if VRX is telling us the truth, their deal making abilities are not to be questioned. People should instead admire them and hopefully learn something! Cheers, Gio

To this I have already answered: I run a very concentrated portfolio exactly because I think there are very few substitutes to the companies I have chosen! And I cannot sell simply because someone I have never met, nor talked to, who has never proven to me what he has accomplished in business and why his judgement should be relied upon, suggests that an investment of mine might be a fraud... Instead, I have started a poll to shift the attention of the VRX thread on this topic: how much can shareholders rely on VRX management? Are they telling lies, or are they trustworthy? Because imo that's all AZ_Value has achieved with is post: to raise the doubt about VRX quarterly results as they are reported to shareholders. I don't really care about the results of the poll... I care about the discussion instead! And for what I have heard till now, I think on Monday I am buying more!? Cheers, Gio

I saw that you said that. But what do you mean? That price doesn't matter? It doesn't matter simply because, if what they are reporting in their quarterly releases and conference calls is true, VRX is cheap today! If they truly are able to get the results they talk about, opportunities out there abound, and they will be able to go on growing for at least the next 5 years. Therefore, the question shareholders must answer is the following: are VRX's power point presentations reliable? Do they report business results that are true? Or, like AZ_Value has said, do they belong to the garbage can? Cheers, Gio

Gio, Ackman is much smarter than me and better at this, I give you that. No arguments. Yesterday in one of the other threads I read a quote by one of cobf members - investing is much more than counting, any idiot can count. :) Think about how true that statement is. Your valuation model can be great, but your judgement might be wrong. It took me a while as an engineer and person who loves spreadsheets to figure out investing needs other skills too!! And that's exactly why I have started the poll!? I repeat: imo those focusing on valuation are missing the forest for the tree... Cheers, Gio

Rpadebet, First you say that VRX is your largest investment... Then you say fair value is $140... This isn't really serious, is it?... Come on!? By the way, as far as valuation is concerned, you won't do any better than what Ackman did on this company. Valuation is really the last worry of mine! Cheers, Gio