giofranchi
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Everything posted by giofranchi
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VRX - Valeant Pharmaceuticals International Inc.
giofranchi replied to giofranchi's topic in Investment Ideas
I agree. And that would be a nice thing to see! Gio -
VRX - Valeant Pharmaceuticals International Inc.
giofranchi replied to giofranchi's topic in Investment Ideas
I wonder: if ZTS stock price is so high, why is Ackman still holding it in PSH's portfolio? Why isn't he just selling it at a sound profit? ??? Gio -
Howard Marks: The ‘Uncomfortably Idiosyncratic’ Billionaire | Observer http://observer.com/2015/06/howard-marks-the-uncomfortably-idiosyncratic-billionaire/ Gio
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Tom Gayner | The Evolution of a Value Investor http://linkis.com/www.youtube.com/suS6i Cheers, Gio
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--Ernest Hemingway Gio
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Imo it will be worth a lot more after the tender offer is past us… Will the price be below or above $420? I have no idea… Though I hope it might trend lower! ;) Cheers, Gio
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VRX - Valeant Pharmaceuticals International Inc.
giofranchi replied to giofranchi's topic in Investment Ideas
Imo now that organic growth is very clearly shown at the end of each quarter, business results speak for themselves. Period. Cheers, Gio -
VRX - Valeant Pharmaceuticals International Inc.
giofranchi replied to giofranchi's topic in Investment Ideas
Basically I agree… Though it is easy to see why things are more complicated than that: if you perceive VRX stock is quite attractively priced, you must have assumed in your valuation that Pearson will go on making shrewd acquisitions for a long time… Acquisitions for which he certainly won’t overpay! Vice versa, if Pearson starts to overpay VRX equity might not be as attractively priced as you think… Generally I tend not to question business decisions taken by any owner/manager alongside whom I have invested. I only take business results as they come: if I like them, I keep my investment, otherwise I sell. Gio PS That’s why I have always insisted that it is very important for me to be sure to know how to read business results correctly! ;) -
Opened a 5% position today. Cheers, Gio
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VRX - Valeant Pharmaceuticals International Inc.
giofranchi replied to giofranchi's topic in Investment Ideas
loganc, I don’t think I agree… Strategically, this deal makes a lot of sense to me: VRX would go from zero to the number 1 player in animal health. And animal health is a sector which enjoys many of the characteristics Pearson has always looked for. To become the number 1 player in a new sector that fits very well within VRX’s acquisition criteria surely is valuable. I agree, instead, the financing of this deal is a lot more uncertain… That’s why I dind’t see it coming so soon! Cheers, Gio -
Thank you very much! :) Gio
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VRX - Valeant Pharmaceuticals International Inc.
giofranchi replied to giofranchi's topic in Investment Ideas
Ah!... I think I saw this coming... Though I would not have imagined it might have come so soon! ;) Cheers, Gio -
Or also trying to take advantage of a very low cost of money? ;) Gio
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Yeah!... When I don’t see a “quantitative” margin of safety, I usually respond by leaving room to average down… Because I can never know when the market will hand me the opportunity of seeing a “quantitative” margin of safety… And in the meantime a very high quality business like CSU might have created lots of value! ;) Cheers, Gio
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In other words, imo it doesn’t matter how you grow FCF, it only matters how fast you grow it. The faster, the higher the multiple you deserve. Gio
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But I have never valued CSU with a sum of the parts analysis. Instead, I have just put a multiple on its FCF. And that multiple will be lower for a company than doesn’t grow FCF, will be higher for a company that grows FCF organically, and will be even higher for a company that grows FCF both organically and through acquisitions. Gio
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Let me explain: a 5% organic growth alone might be enough to justify a multiple of 15x FCF, yet 10 years from now opportunities for acquisitions will be far from over! Therefore, in 2025 the market most probably will price CSU as a business that might still go on growing both organically and through acquisitions. Gio
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Hi Pete, 1) I define FCF as cash flow from operations less interests paid, less capital expenditures (maintenance capex + organic growth capex). Acquisitions imo are investments for external growth. And of course any investment for external growth is capital that could be withdrawn by shareholders without affecting the already existing businesses at all. Not even their organic growth! Therefore, it doesn’t affect my thinking at all. 2) Sorry! It was not clear. Let’s look at the slide in attachment (which had already been posted before): There are in the US, Canada, and Europe 17,399 companies with annual revenues below $300 million. This is the overall number of companies that could be purchased. Compare this number with 131 acquisitions made by CSU during the last 5 years. Cheers, Gio
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VRX - Valeant Pharmaceuticals International Inc.
giofranchi replied to giofranchi's topic in Investment Ideas
http://seekingalpha.com/news/2598265-healthcare-stock-screen-of-the-month-low-peg-ratio?uprof=25#email_link Gio -
$16.11 per share is 2014 operating cash flow. If you subtract interest and capex, you get $14.82 per share of FCF. Let’s suppose operating cash flow per share, and therefore also FCF per share, in 2015 grow in line with their growth rate of the last few years, let’s say 30% (ANI has already grown 40% in Q1 2015). Then, 2015 FCF per share might be $19.27. Today’s multiple is $422 / $19.27 = 22x 2015 FCF. Now, let’s suppose CSU grows FCF at a CAGR of 15% for the next 10 years. Can you see a company that increases FCF at a CAGR of 15% during the next decade selling for a multiple of 15x 2025 FCF? Of course! Right? Therefore, let’s also suppose CSU is selling for a multiple of 15x 10 years from now. In this scenario, you would get a return of 10.5% compounded annually. So, let me summarize: Here we have a company operating in a growing market which already has: - 17,144 companies with annual revenues below $200 million plus - 16,536 companies with annual revenues below $100 million That could be bought, just in the US, Canada, and Europe. Not to mention EM of course! With $1.67 billion in 2014 revenues CSU imo is still a small company, at least if compared to the size of the market in which it operates. Leonard is not yet 60. There is no real reason why CSU should materially slow down: opportunities still abound and the quality of its management won’t change for the worse anytime soon. We are assuming a CAGR in FCF per share that slows down from 39% to 15%, almost without justification (except perhaps no company that I know of has ever sustained a CAGR in FCF per share of 39% for a long time), and a multiple contraction from 22x to 15x… and still we get a return of 10.5% compounded annually… in a world where the cost of money is 5%... Really?! Well, I would be hard pressed to find a better definition of “margin of safety” in investing! ;) Gio
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Just bought more! ;) Cheers, Gio
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The most important paragraph in business literature?
giofranchi replied to giofranchi's topic in General Discussion
Yes, it is! Page 421 :) Gio -
The most important paragraph in business literature?
giofranchi posted a topic in General Discussion
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VRX - Valeant Pharmaceuticals International Inc.
giofranchi replied to giofranchi's topic in Investment Ideas
Valeant and Progenics Announce the Submission of U.S. New Drug Application for Oral RELISTOR® http://ir.valeant.com/investor-relations/news-releases/news-release-details/2015/Valeant-and-Progenics-Announce-the-Submission-of-US-New-Drug-Application-for-Oral-RELISTOR/default.aspx Gio