VRX - Valeant Pharmaceuticals International Inc.

[jay21]

I think Rasputin has done the best job outlining the bull case post-Philidor. Thanks.

 

To add a data point from the BBG link I posted earlier:

 

"Valeant’s Ebitda could fall to between $5.6 billion and $5.9 billion next year, according to David A. Kaplan, an analyst at Standard & Poor’s, which would further stress the company’s interest-coverage ratio. Kaplan cautioned that the forecast may be conservative relative to the way that senior lenders evaluate the number when assessing financial-covenant ratios, meaning Valeant could generate less and still comply with covenants."

 

I believe that 5.6 to 5.9 is probably close to management's pessimistic scenario.

[Guest roark33]

In the past few days, I’ve sold my VRX position. I always try to keep the old Churchill saying in mind: “When the facts change, I change my mind.”

 

When this thing started, I was pretty sure that the “phantom network of pharmacies” with “fake sales” and “channel stuffing” was BS, and the shady character of the shorts made me even wearier of their accusations. I think the early attacks turned out to be incorrect.

 

Then other things were dug up that were harder to decide on. I gave management the benefit of the doubt and waited to see their response. I wasn’t entirely reassured by it. To be fair, it’s not completely their fault; it’s expected that they won’t comment on an ongoing investigation that could take months to bear fruit. This still meant that my confidence was somewhat eroded, I couldn’t get answers to many questions, and I ended closer to sitting on the fence. And I don’t want to sit on the fence with my investments. I need more confidence than that.

 

But the real reason I ended up selling is that I didn’t sign up for this, this isn’t really the kind of thing I want to do. Life’s too short. I try to build a portfolio of high-quality businesses with reinvestment opportunities that I can hold for a long time without too much worry. VRX has turned into a real pain trade where you basically will get paid for your ability to suffer through it (unless things are worse than I expect…).

 

So I thought about it and I don’t need the stress in my life. I’d rather take the loss and move on (thankfully I invested a while ago, so the loss on my original investment wasn’t quite as catastrophic as it would be for someone who bought at the top). It’s likely that I’ve bottom-ticked it and from now on all the news are good and the stock rallies to the sky, but so be it — sometimes you have to make a call.

 

Some people are much better than I am at doing these pain-based-investments, living with bad news and uncertainty for months and years until the negativity clears up and the blue sky reappears. People who bought EBIX in 2013 more than tripled their money…

 

But I thought about how much I wanted the money vs. all the drama, spending so much time and energy on this for possibly months if not years, and I’d rather have fewer worries when I’m with my wife and young son :)

 

I invest to increase my independence. When my investments start to reduce how free I feel, they’re probably not worth it.

 

 

This is very well said and most certainly applies to other investments, not just VRX...

[LongHaul]

In the past few days, I’ve sold my VRX position. I always try to keep the old Churchill saying in mind: “When the facts change, I change my mind.”

 

When this thing started, I was pretty sure that the “phantom network of pharmacies” with “fake sales” and “channel stuffing” was BS, and the shady character of the shorts made me even wearier of their accusations. I think the early attacks turned out to be incorrect.

 

Then other things were dug up that were harder to decide on. I gave management the benefit of the doubt and waited to see their response. I wasn’t entirely reassured by it. To be fair, it’s not completely their fault; it’s expected that they won’t comment on an ongoing investigation that could take months to bear fruit. This still meant that my confidence was somewhat eroded, I couldn’t get answers to many questions, and I ended closer to sitting on the fence. And I don’t want to sit on the fence with my investments. I need more confidence than that.

 

But the real reason I ended up selling is that I didn’t sign up for this, this isn’t really the kind of thing I want to do. Life’s too short. I try to build a portfolio of high-quality businesses with reinvestment opportunities that I can hold for a long time without too much worry. VRX has turned into a real pain trade where you basically will get paid for your ability to suffer through it (unless things are worse than I expect…).

 

So I thought about it and I don’t need the stress in my life. I’d rather take the loss and move on (thankfully I invested a while ago, so the loss on my original investment wasn’t quite as catastrophic as it would be for someone who bought at the top). It’s likely that I’ve bottom-ticked it and from now on all the news are good and the stock rallies to the sky, but so be it — sometimes you have to make a call.

 

Some people are much better than I am at doing these pain-based-investments, living with bad news and uncertainty for months and years until the negativity clears up and the blue sky reappears. People who bought EBIX in 2013 more than tripled their money…

 

But I thought about how much I wanted the money vs. all the drama, spending so much time and energy on this for possibly months if not years, and I’d rather have fewer worries when I’m with my wife and young son :)

 

I invest to increase my independence. When my investments start to reduce how free I feel, they’re probably not worth it.

 

Great post Liberty! 

[vinod1]

In the past few days, I’ve sold my VRX position. I always try to keep the old Churchill saying in mind: “When the facts change, I change my mind.”

 

When this thing started, I was pretty sure that the “phantom network of pharmacies” with “fake sales” and “channel stuffing” was BS, and the shady character of the shorts made me even wearier of their accusations. I think the early attacks turned out to be incorrect.

 

Then other things were dug up that were harder to decide on. I gave management the benefit of the doubt and waited to see their response. I wasn’t entirely reassured by it. To be fair, it’s not completely their fault; it’s expected that they won’t comment on an ongoing investigation that could take months to bear fruit. This still meant that my confidence was somewhat eroded, I couldn’t get answers to many questions, and I ended closer to sitting on the fence. And I don’t want to sit on the fence with my investments. I need more confidence than that.

 

But the real reason I ended up selling is that I didn’t sign up for this, this isn’t really the kind of thing I want to do. Life’s too short. I try to build a portfolio of high-quality businesses with reinvestment opportunities that I can hold for a long time without too much worry. VRX has turned into a real pain trade where you basically will get paid for your ability to suffer through it (unless things are worse than I expect…).

 

So I thought about it and I don’t need the stress in my life. I’d rather take the loss and move on (thankfully I invested a while ago, so the loss on my original investment wasn’t quite as catastrophic as it would be for someone who bought at the top). It’s likely that I’ve bottom-ticked it and from now on all the news are good and the stock rallies to the sky, but so be it — sometimes you have to make a call.

 

Some people are much better than I am at doing these pain-based-investments, living with bad news and uncertainty for months and years until the negativity clears up and the blue sky reappears. People who bought EBIX in 2013 more than tripled their money…

 

But I thought about how much I wanted the money vs. all the drama, spending so much time and energy on this for possibly months if not years, and I’d rather have fewer worries when I’m with my wife and young son :)

 

I invest to increase my independence. When my investments start to reduce how free I feel, they’re probably not worth it.

 

I really admire your thought process. This is a difficult thing to do and only the second time that I saw in this forum someone change a well entrenched position. The first time was Parsad's change of heart on Biglari.

 

Vinod

[karthikpm]

+1

 

I liked this statement the best ..

 

I invest to increase my independence. When my investments start to reduce how free I feel, they’re probably not worth it.

[jay21]

Liberty - I like you and you usually agree with you but I don't think your logic is sound here. What happens when one of your good businesses experience some pain, uncertainty, etc? Almost every company goes through both fundamental and price related declines. Quite a few are often severe. What will you do  the next time one of your companies inevitably goes through a similar decline?

 

Just listing some examples:

 

AXP - salad oil

LUK/JEF - Sovereign debt crisis

WF - Financial Crisis

News Corp - Phone hacking scandal

BAC - litigation

GM - recalls

 

and on...

[blainehodder]

Looks like Grantham really loaded the boat by the 13G

[Liberty]

Liberty - I like you and you usually agree with you but I don't think your logic is sound here. What happens when one of your good businesses experience some pain, uncertainty, etc? Almost every company goes through both fundamental and price related declines. Quite a few are often severe. What will you do  the next time one of your companies inevitably goes through a similar decline?

 

Just listing some examples:

 

AXP - salad oil

LUK/JEF - Sovereign debt crisis

WF - Financial Crisis

News Corp - Phone hacking scandal

BAC - litigation

GM - recalls

 

and on...

 

Hi Jay,

 

Maybe you're right. I've been through a lot with other businesses, it's always a learning experience. But I feel like the situation with Valeant isn't exactly common. It's not like I plan to jump ship every time there's a problem with one of my investments. I feel it has to be a case-by-case judgement call. I'd probably be fine holding through a product recall or whatever (I did own BAC warrants through a lot of the litigation). Here I stopped being comfortable enough. What can I say? I am how I am. Know thyself.

 

By the way, I still think it's likely the business will be mostly fine and the stock price will recover at least to some degree within a year or two. But I decide not to participate in that process because it's not a ride I particularly want to be on.

 

But I still have the option of buying it again, so who knows what will happen... The last word on this has not been written yet :)

[ourkid8]

Who is he?

 

Looks like Grantham really loaded the boat by the 13G

[fareastwarriors]

Bloomberg screen grab today.

[mcliu]

Isn't this the best time to buy this? I mean, if things turn out to be fine, then you get 2x upside and if things turn out badly your downside is 1x. At this point the odds are maybe 50/50?  ::)

[original mungerville]

Who is he?

 

Looks like Grantham really loaded the boat by the 13G

 

GMO - runs over a hundred billion - value investing and asset allocation

[CONeal]

I don't know if this was already posted or not.

 

http://www.reuters.com/article/2015/11/12/valeant-pharmacies-officers-idUSL1N1361N720151112#eFEJf3lrU7LqUPRT.97

 

The Valeant employees worked with the founders of the pharmacy, Philidor Rx Services, to set up the business in 2013 and expand its operations, three of the former employees said. The Valeant employees then remained closely involved in details of running the pharmacy.

 

At different points in the company's evolution, their roles included interviewing job applicants and involvement with billing.

 

I know CONeal said before that it's often very common for pharmaceutical companies to sit at a specialty pharmacy to make sure that things are set up correctly, but is the above also common?

 

Interviewing job applicants is not normal and definitely not an arms length relationship as VRX suggest.  Regarding the billing it really depends, is VRX arguing with the pharmacy when they are not getting reimbursed for a drug and showing ways and tricks so they get reimbursed?  or does the billing involvement have a little more going on behind the scenes. 

 

Also, I think the question should be asked could this possibly be a rogue team in VRX that was doing everything they could to get a better bonus and title?  I can really see a scenario where VRX CEO had no idea what was going on at the daily operations level of VRX/Philodor and the level of involvement.  I say this bc people in general tend to gloss over things and try and bend metal when it comes to pleasing the higher ups in any company.

 

I found this article very interesting

 

http://www.bloomberg.com/news/articles/2015-11-12/pharmacies-like-philidor-make-life-easy-for-doctors-at-a-price

[ZenaidaMacroura]

Wait is Morfitt's personal holding 15 million personal shares?  If so, I didn't realize his position was larger than valueacts...

[plato1976]

Hi, Rasputin:

 

This is so far the most convincing argument I see here.

I just began to look into this case and have two questions. Hope you can shed some lights on them:

 

1. For the 5Billion "good" EBITDA, you estimated it has at least 10 years growth ahead. How do you decide its durability? How do we know that with a very small R&D (which seems smaller than peers) we can keep growth here and fend off competition from generics etc. It's basically a question about the moat of Valeant's core business in some sense

2. I also want to understand what true "value" Valeant added in its past acquisitions. Why it's a better way to allocate capital than internal r&d. you mentioned they did great work on B&L etc., could you explain a little bit? b/c many believe that besides the pricing gouge they didn't add much true extra value in those acquisition

 

Thanks!

 

/plato1976

 

Are you taking the figures out of 2016 estimates?  Meaning, starting with the $7.5 billion guidance and then subtracting things out to zero?  This is where I struggle with the math because we're kind of taking management on their word for what 2016 was supposed to look like.  I also thought it was reasonable to expect around $2.5 billion+ of free cash flow but it required usage of numbers given from management.  I would much rather be able to just pull everything out of the Q's and K's to get a more straightforward answer.  Would like to avoid the typical sell-side garbage in/garbage out if possible.

 

In your worst case, based on number of shares outstanding today, cash EPS would be around $8.  That's a huge discount to what 90% of shareholders are saying about the stock.  You can pull up Sequoia, or Ackman, or some others on this thread still talking about $12 cash eps +.  I'd like to think expectations from shareholders aren't low enough where there's no downside in that event.  It's kind of weird.... stock has been decimated but lots of investors still pointing to the 2016 guidance and pulling out a couple bucks to account for these problems....

 

So risk for the stock is likely to be bad cash EPS + not durable cash flows (negative SSS) forming a narrative around a really low valuation metric like 7x cash EPS (there are stocks like CXRX trading for 4x cash EPS).  In that situation investors can easily make this a $30 stock.  Maybe as a long-term investor that's just par for the course but I think there's at least a majority chance of that happening.  So if you think that's the worst case you also have to discount the market reaction to that event.  Almost the entire sell-side is still positive on the stock and no big holder has capitulated yet....

 

Like you said, maybe it's like BAC at $9 when Warren did the warrants.  It was a good deal but you still had the stock hit $5.  VRX is different than BAC and requires a lot more conviction around some anecdotal ideas to be able to buy more and just hold through that.

 

Also, are you just going to ignore the enterprise value and simply focus on the equity value?  So your logic would be that you are buying the stock because you assume they survive, so what's the debt matter?  There's probably a really good chance the market won't view it that way if they do indeed start reporting bad numbers.  And that's where I think you would have a great opportunity to buy the stock assuming no other big cockroaches started scurrying out of the kitchen....

 

Edit: By the way, not dismissing your numbers or idea.  Just trying to follow the logic and kill your thesis if possible.

 

I do it both ways. 

 

1.  Use solely the 2014 10K + Salix merger document

 

This eliminates most of Philidor/captive pharmacy effect, Jublia (launched in Q2 2014, minimal sales in 2014),  Glumetza, Isuprel, Nitropress.

 

2014 ebit $2.04 Billion (this includes restructuring charges, iprd impairments, acquisition costs etc,).

deduct 2014 other income $270 million (gain from divestitures of injectables, etc)

2014 core ebit $1.77 Billion (this excludes gain from allergan)

2014 d&a $1.74 Billion

2014 ebitda $3.5 Billion

2016 salix stand-alone ebitda $1.0 Billion (subtract glumetza from merger doc)

2016 salix cost save $0.5 Billion

2016 ebitda $5 Billion

 

2.  Use September 28 2015 letter, but this requires us to use management slides to estimate how much revenue comes from derm rx, what kind of revenue/ebitda management has in mind for 2016 etc. 

 

Going by Q3 2015 slide deck, low end 2015 revenue guidance = $10.7 Billion

In that letter, Mike talks about high single digit growth for emerging markets, 3% growth in ex US developed market.  Exclude growth from dermatology, opthalmology rx , dentistry rx, neurology and others (30% of 2016 revenue).  let's just say 5% combined growth from the rest of the business (70%).  2016 non salix revenue = $11.1 Billion

Add Salix 2016 revenue = $2.3 Billion (subtract glumetza)

Total 2016 revenue = $13.4 Billion

Deduct 25% for derma rx, neurology and others (insta death "bad valeant")

2016 "good valeant" revenue = $10 Billion

2016 ebitda = $5 Billion (50% ebitda margin)

 

In both of these scenarios, I don't take into account ebitda from non salix 2015 acquisitions, even though on the interest expense line, I accounted for all the debt.

 

I use fcf/market cap yield rather than ebitda/ev yield because of their low tax rate. 

 

Likelihood of valeant being forced to liquidate or sell subsidiaries for cheap due to debt is  low. 

 

I'm prepared for the stock to go down to $30 and I would be very ecstatic.  It would be my Christmas gift. 

 

Buying BAC at $10 in 2011, still get 70% return in 4 years.  The only requirement for that 70% return is to keep holding it even as the stock went from $10 to less than $5.  My lowest cost lot is $4.94 executed on 12/19/2011 outside regular hours due to my limit order at IB.  I still own all of the shares I bought in 2011 and have added more through out the years. 

 

I actually find buying VRX today a lot easier than BAC 2011.  The good valeant is solid.  No regulators can force raising capital at very cheap stock price.  No tens of billions of dollar lawsuit.  No worry about rejection of deal with private label, customers closing accounts, etc. etc. 

[Rasputin]

Hi, Rasputin:

 

This is so far the most convincing argument I see here.

I just began to look into this case and have two questions. Hope you can shed some lights on them:

 

1. For the 5Billion "good" EBITDA, you estimated it has at least 10 years growth ahead. How do you decide its durability? How do we know that with a very small R&D (which seems smaller than peers) we can keep growth here and fend off competition from generics etc. It's basically a question about the moat of Valeant's core business in some sense

2. I also want to understand what true "value" Valeant added in its past acquisitions. Why it's a better way to allocate capital than internal r&d. you mentioned they did great work on B&L etc., could you explain a little bit? b/c many believe that besides the pricing gouge they didn't add much true extra value in those acquisition

 

Thanks!

 

/plato1976

 

Hi plato,

 

That $5 billion "good valeant" ebitda comes from 3 different buckets:

 

1.  B+L

 

2014 Sales $3.44 Billion

2014 EBITDA $1.7 Billion

 

B+L grew high single digit this year, well known brand, there has been no price increase here cause they want to take back market share, occuvite/preservision is pretty much a monopoly in supplement for AMD (advanced macular degeneration).

 

2.  Salix

 

2016 projected sales $2.3 Billion

2016 projected EBITDA $1.5 Billion ($1 Billion stand alone forecast + $500 million cost save)

Mike Pearson said they haven't increased prices for Salix drugs

 

3.  Ex US business + dermatology non RX (cerave, thermage, fraxel) + opthalmology rx + dental rx

 

2016 projected sales $4 Billion

2016 projected ebitda $1.8 Billion

 

price increases in opthalmology + dental rx.  minor price increase in cerave.  they say ex us business there is not much pricing power.  This is where valeant circa 2011-2012 focus on: good growth geographies, cash pay, etc. 

 

I'm attaching B+L showcase presentation so you can see what they did with B+L

 

B+L 2012 EBITDA $643 Million

B+L 2012 SALES $3.04 Billion

B+L 2013 EBITDA $720 Million

B+L 2013 SALES 3.13 Billion

B+L 2014 SALES $3.44 Billion

B+L 2014 EBITDA $1.7 Billion

 

They actually increased R+D when they acquired B+L for B+L product launches (see 2013 10-K).

 

In any event that $2.5 Billion of free cash flow is supported by $600 million investments (in capex + working capital).  They actually have $3.1 Billion to play with.  If there is no growth, i doubt they'd continue to invest $600 million per year. 

MAY_28_2014_B+L_SHOWCASE_PRESENTATION.pdf

[Picasso]

Thanks for outlining your thesis Rasputin.  I think you do one of the better jobs on this board in terms of providing a logical framework when we're all trying to find a margin of safety.

 

For myself, I think I would take another look at repurchasing my shares if it traded $40 or lower.  There's just too many ways this can trade at a 15-20+% levered free cash yield.  In many ways I think management has lost themselves trying to pursue maximum profits and finding ways to meet their own self inflicted guidance.  My following remarks will be more qualitative versus quantitative, but I think they are equally important:

 

When Valeant first started showing signs of weakness after losing 25% from the highs on the Hilary Clinton tweet/price gouging concerns, Pearson put out that email saying those practices represented less than 10% of 2016 business.  But an investor would have to dig deeper to realize that 10% of 2016 business (more like 16% of 2015) is what helped them meet 2015 guidance.  2016 would only be harder yet they stick with the language as "comfortable with $7.5 billion EBITDA for 2016." 

 

Then we have to find out the hard way that they're also essentially price gouging in other parts of their business by using Philidor or its affiliates.  It isn't until after the stock gets murdered and they get called Enron that we get some line about Philidor being a "specialty" pharmacy and it being a "competitive advantage."  Wouldn't that have been helpful information for investors/employees after the email dismissing the price gouging concerns?  Valeant found a sneaky way of letting the insurance companies/society swallow the price gouging so that it was less noticeable. 

 

Now if we only look at their 10-K, what kind of information can we get to determine whether the acquisitions are working?  All we get are developed and emerging markets segmentation.  Like not helpful at all because there are so many different ways to make the aggregate cash flow from those segments looks better than they are.  Which is exactly what has happened since they changed the segment reporting. 

 

So we're left with relying nearly 100% on what management is telling us when management has already shown us that they either can't be trusted or choose to deceive because it would give away their competitive advantage.  Give me a break.  If telling people your competitive advantage gives away the advantage, it's not a competitive advantage.  Buffett has no problem telling investors about the competitive advantages of all his businesses because they're real and sustainable.  Competitive advantages aren't supposed to disappear overnight when people find out about it.  It's just a short-term/unsustainable business practice to take advantage of some kind of loophole.  And then every couple years the business updates on an acquisition falls off (like it just did with B+L) and it gets lumped into those two segments where we have no 10-K/10-Q idea on how they're performing.  We have to assume it must be good based on management speak or the aggregate cash flows from the entire business.  But based on their business mix that can be entirely manipulated.

 

There's also a little bit of a binary situation to your margin of safety.  If for some reason they have to break up the company, you have to remember that Valeant was the highest bidder on a lot of private auctions because of the cost/tax advantage.  There aren't a lot of buyers out there who would bid a similar value without also having a similar cost/tax structure.  In fact Ackman just recently called that their competitive advantage (in his words: Valeant had the ability to overpay which was their competitive advantage... my words: I thought they were value investors in the healthcare space?).  Let's say B+L is worth $15B and Salix is somehow worth $20B.  That leaves $5B of value (subtracting debt) for the rest of equity holders and you have a $27B business holding these other assets.  Is the rest of Valeant really worth $22B if we're doing a sum of the parts?  I don't see how it would be no matter how I move the numbers around unless it happens in 5 years and they earn $10 billion of cash by then.

 

This isn't cheap enough on a realistic sum of the parts, but it's looking cheap as a going concern if they just take it slow and wait for better days to buy stickier assets.  I'm not entirely sure the business can handle another Philidor type blow up that would force them to wind down operations by selling off the pieces.  A bet going long here is not just a bet that the stock is cheap enough to survive the next few years.  It's also a bet that you stomped on the last of the cockroaches fleeing the kitchen.  That's the main reason why I think it's still premature to go long at a 10% levered "worst case" yield.

[jay21]

If VRX can do $500 synergies on Salix's $2.2b revenue, the margin would be ungodly (approaching 70%).

 

[giofranchi]

Liberty - I like you and you usually agree with you but I don't think your logic is sound here. What happens when one of your good businesses experience some pain, uncertainty, etc? Almost every company goes through both fundamental and price related declines. Quite a few are often severe. What will you do  the next time one of your companies inevitably goes through a similar decline?

 

Just listing some examples:

 

AXP - salad oil

LUK/JEF - Sovereign debt crisis

WF - Financial Crisis

News Corp - Phone hacking scandal

BAC - litigation

GM - recalls

 

and on...

 

Jay,

I think fraud is different…

I cannot say how many public companies are out there, probably there are more than 10,000. And I am looking for those 15-20 companies with a management that is not only great at allocating shareholders’ capital, but is very honest too.

We all make mistakes, and I am well prepared to have patience and wait, when an operator I have decided to invest with has made some serious mistake… Still, fraud is another matter.

I cannot say if Pearson has truly let fraud happen knowingly inside VRX. If you ask me, I would say I don’t think so. But it is still not clear… And, like I have said to ourkid8 in a PM, I believe VRX at $200 without the doubt of fraud was a much better investment than VRX at $80 with the uncertainty of fraud still hovering above it.

Therefore, I essentially agree with Liberty.

 

Cheers,

 

Gio

 

[Guest Grey512]

gio, Liberty -

 

would there be a price at which (all other things unchanged from today) you would be willing to go long VRX again? Or do you see this as a "not any price" kind of a situation?

 

thx

 

 

[giofranchi]

gio, Liberty -

 

would there be a price at which (all other things unchanged from today) you would be willing to go long VRX again? Or do you see this as a "not any price" kind of a situation?

 

thx

 

There is a committee that is working. Personally, I’ll wait to hear what they are going to come up with. If no fraud is found, and of course they could prove it beyond any doubt, VRX share price might go back to $200 very quickly. Of course, I know I won’t be able to react as quickly… Therefore, I’ll take my time reviewing the committee’s findings, and if I think they are utterly clear and very convincing, I will be glad to reevaluate an investment in VRX again even at that much higher price.

 

Cheers,

 

Gio

 

[bskptkl]

In the past few days, I’ve sold my VRX position. I always try to keep the old Churchill saying in mind: “When the facts change, I change my mind.”

 

When this thing started, I was pretty sure that the “phantom network of pharmacies” with “fake sales” and “channel stuffing” was BS, and the shady character of the shorts made me even wearier of their accusations. I think the early attacks turned out to be incorrect.

 

Then other things were dug up that were harder to decide on. I gave management the benefit of the doubt and waited to see their response. I wasn’t entirely reassured by it. To be fair, it’s not completely their fault; it’s expected that they won’t comment on an ongoing investigation that could take months to bear fruit. This still meant that my confidence was somewhat eroded, I couldn’t get answers to many questions, and I ended closer to sitting on the fence. And I don’t want to sit on the fence with my investments. I need more confidence than that.

 

But the real reason I ended up selling is that I didn’t sign up for this, this isn’t really the kind of thing I want to do. Life’s too short. I try to build a portfolio of high-quality businesses with reinvestment opportunities that I can hold for a long time without too much worry. VRX has turned into a real pain trade where you basically will get paid for your ability to suffer through it (unless things are worse than I expect…).

 

So I thought about it and I don’t need the stress in my life. I’d rather take the loss and move on (thankfully I invested a while ago, so the loss on my original investment wasn’t quite as catastrophic as it would be for someone who bought at the top). It’s likely that I’ve bottom-ticked it and from now on all the news are good and the stock rallies to the sky, but so be it — sometimes you have to make a call.

 

Some people are much better than I am at doing these pain-based-investments, living with bad news and uncertainty for months and years until the negativity clears up and the blue sky reappears. People who bought EBIX in 2013 more than tripled their money…

 

But I thought about how much I wanted the money vs. all the drama, spending so much time and energy on this for possibly months if not years, and I’d rather have fewer worries when I’m with my wife and young son :)

 

I invest to increase my independence. When my investments start to reduce how free I feel, they’re probably not worth it.

Thanks for sharing post-mortem and wise words. Been there, done that...know how it feels.

[ourkid8]

Lou Simpson added to his VRX position by 13% 

[plato1976]

not sure if it's before philidor or after

 

Lou Simpson added to his VRX position by 13%

[cmlber]

not sure if it's before philidor or after

 

Lou Simpson added to his VRX position by 13%

 

It's before, at a minimum price of $160/share.