Graham Osborn Posted July 7, 2016 Share Posted July 7, 2016 For those interested in a company that could be similar to Valeant, see my post on the board on XPO. Especially the last bullet point. Uncanny similarities. It does have a death triad of rev/ tbook/ LT debt. I'll have a look, thanks. Link to comment Share on other sites More sharing options...
Liberty Posted July 13, 2016 Share Posted July 13, 2016 Pearson dumping shares (without publicly filing so far, apparently): http://www.cnbc.com/2016/07/13/former-valeant-ceo-unloaded-more-of-shares-than-previously-thought.html Link to comment Share on other sites More sharing options...
Peregrino Posted July 13, 2016 Share Posted July 13, 2016 Tax pain coming for Sequoia fund investors as the firm exits its position in VRX entirely. From the Sequoia letter: "However, we sold shares, too, and there were tax consequences given the enormous appreciation we have enjoyed over many years. To provide visibility on taxes, we declared a capital gains distribution in mid-June of $17.24 per share, which is earlier than usual. This is a sizable capital gain and we recognize the pain caused by a high taxable gain in a year where the Fund is down." So in a year when the fund is down 13% ytd, investors will be hit with capital gains taxes because - even after the sharp decline in VRX's share price - the fund was able to sell out of the position at a price above their cost basis, given how long they have owned the shares. Correct me if I am wrong, but a $17/share capital gain will create another 1.5-2% drag on fund-holder net returns for the year, depending on whether you pay LT cap gains taxes at the 15% or 20% rate. Adding a new item to my mutual fund investment checklist - when you buy shares in a fund, you inherit their basis, so check the tax situation before buying in. Full letter here: http://www.sequoiafund.com/RCG%20Letter%207-12.pdf Link to comment Share on other sites More sharing options...
Jurgis Posted July 13, 2016 Share Posted July 13, 2016 Adding a new item to my mutual fund investment checklist - when you buy shares in a fund, you inherit their basis, so check the tax situation before buying in. This sounds good in theory, but in practice it's not that easy. You either don't buy Sequoia at all or you inherit its BRK/etc. very low basis. They would say that they will never sell, but VRX situation shows differently. So you are faced with rather difficult choice. :) OTOH, if you buy a fund that trades more and doesn't have long term positions with low basis how do you know that they can outperform? Most high turnover funds don't. Link to comment Share on other sites More sharing options...
John Hjorth Posted July 13, 2016 Share Posted July 13, 2016 Tax pain coming for Sequoia fund investors as the firm exits its position in VRX entirely. From the Sequoia letter: "However, we sold shares, too, and there were tax consequences given the enormous appreciation we have enjoyed over many years. To provide visibility on taxes, we declared a capital gains distribution in mid-June of $17.24 per share, which is earlier than usual. This is a sizable capital gain and we recognize the pain caused by a high taxable gain in a year where the Fund is down." So in a year when the fund is down 13% ytd, investors will be hit with capital gains taxes because - even after the sharp decline in VRX's share price - the fund was able to sell out of the position at a price above their cost basis, given how long they have owned the shares. Correct me if I am wrong, but a $17/share capital gain will create another 1.5-2% drag on fund-holder net returns for the year, depending on whether you pay LT cap gains taxes at the 15% or 20% rate. Adding a new item to my mutual fund investment checklist - when you buy shares in a fund, you inherit their basis, so check the tax situation before buying in. Full letter here: http://www.sequoiafund.com/RCG%20Letter%207-12.pdf Honestly, so what? The limited partners of Sequoia Fund are supposed to be aware of the rules of the game. The gain is realized, with regards to taxes. Link to comment Share on other sites More sharing options...
Peregrino Posted July 13, 2016 Share Posted July 13, 2016 This sounds good in theory, but in practice it's not that easy. You either don't buy Sequoia at all or you inherit its BRK/etc. very low basis. They would say that they will never sell, but VRX situation shows differently. So you are faced with rather difficult choice. OTOH, if you buy a fund that trades more and doesn't have long term positions with low basis how do you know that they can outperform? Most high turnover funds don't. Jurgis - You are of course correct that lower turnover funds are generally preferable to higher turnover funds because of the lower frictional costs of trading, the ability to benefit from time arbitrage, and the difficulty of predicting with accuracy share price values three months out compared with three years out. What I was trying to outline is that lower turnover is not an unequivocal good, that it has some risks to investors buying stocks via funds. It doesn't get talked about much, and I found this to be a good example of when those risks can materialize. I do think, however, that the decision is less stark than the one you outlined (ie, invest in the fund or not). I have never seen a perfect investment, and the point of a checklist is to remind yourself to look for potential warts, and decide whether or not the discount at which you are buying is sufficient to compensate you for those imperfections. To use another example, like leverage. When a company has high leverage your choice isn't invest or don't invest. It's figure out if it matters. Maybe the debt doesn't come due for 10 years, or they have an asset sale in progress that will lower it significantly, or cash flow is about to improve for some reason. Maybe not, but know that it's a risk and figure out if you care. Honestly, so what? The limited partners of Sequoia Fund are supposed to be aware of the rules of the game. The gain is realized, with regards to taxes. Hjorth - despite knowing the rules of the game, you don't find the result even a bit counter-intuitive (ie that you could buy shares in a fund, lose 20%, and get hit with cap gains taxes even though you haven't sold a share)? I did, and I think Sequoia knew others would too which is why they talked about it in the letter. For me the "so-what" was the difference between knowing the general rule and seeing it applied to a specific set of circumstances. I would be shocked if folks who put money to work in Sequoia in late 2015/early 2016 (there must have been some!) calculated the potential tax liability they would inherit and did so anyway. I hope they would, but I'd be surprised if they actually did. Link to comment Share on other sites More sharing options...
Jurgis Posted July 13, 2016 Share Posted July 13, 2016 Peregrino, ok, understood. :) Link to comment Share on other sites More sharing options...
alpha asset strategies Posted July 15, 2016 Share Posted July 15, 2016 A few weeks ago I was cautiously bullish on VRX. It now appears that my thesis was wrong. The basis of my thesis was that VRX still owns some very valuable companies, such as Bausch and Lomb, Salix, etc. - and in a worst case scenario, they could sell off one or more of these divisions in order to pay down their crushing debt load. I felt that on a sum-of-the-parts basis, VRX was worth a minimum of $40B - roughly equal to it's enterprise value at the time. There was a rumor floating around at the time that KKR offered $22B for Bausch and Lomb alone. That rumor now certainly appears to have been unsubstantiated, and I've seen much, much lower estimates of value for VRX's various parts - with a very real possibility that some of VRX's prized franchises could continue to deteriorate in value. As such, there certainly doesn't seem to be a margin of safety on a sum-of-the-parts basis. Perhaps more importantly, it seems as if the company faces major headwinds with regard to a potential turnaround, and servicing the crushing debt load certainly appears like it could turn into a problem. The stock has certainly offered some "juicy" option premiums over the past few months - and I made out ok by selling some short dated puts. However, at this stage I just feel as if the potential risks are too great. I eagerly await to hear what they have to report during the upcoming earnings call. Link to comment Share on other sites More sharing options...
Eye4Valu Posted August 9, 2016 Share Posted August 9, 2016 Would love to hear some more commentary from Roark and Rasputin on VRX. I think you both provided good points/counterpoints on this thread. Link to comment Share on other sites More sharing options...
Guest Schwab711 Posted August 9, 2016 Share Posted August 9, 2016 This is possibly the most predictable "organic growth" I've ever seen. Mr. Peterson purposefully did not sell new Xifaxan for 6 months after the June 2015 approval for new indications to show the growth we are seeing in this and next quarter. Link to comment Share on other sites More sharing options...
Liberty Posted August 11, 2016 Share Posted August 11, 2016 Back to normal: http://www.wsj.com/articles/valeant-under-criminal-investigation-1470868752 "Federal prosecutors probe whether drugmaker defrauded insurers by shrouding ties to mail-order pharmacy" Link to comment Share on other sites More sharing options...
Guest roark33 Posted August 11, 2016 Share Posted August 11, 2016 I think this screenshot from the latest investor presentation sums up my current thoughts on VRX. Jublia used to be the number 2 drug for VRX, as early as last July 2015. http://ir.valeant.com/~/media/Files/V/Valeant-IR/reports-and-presentations/Q22015-earnings-deck-final-august-11-revised.pdf This was one of the cornerstones of their R&D efforts. People can argue about which drugs are going to survive without Philidor (Jublia obviously won't be one of them), but the rot inside a corporation that pulls these kind of moves is too deep for me to ever consider this an investment. Life is just too short to be worrying about whether the execs are lying to you. And after what Papa did at PRGO, I am not sure how you could really consider this new "mgmt"....so that's my two cents. But, I haven't and probably won't have a position anytime in the near future.... Link to comment Share on other sites More sharing options...
writser Posted September 28, 2016 Share Posted September 28, 2016 To make up for my horrible Tony Montana mistake I'll try to be constructive for once, and share another pharmaceutical company as an alternative for Valeant. As opposed to the 200-page dicussion on Valeant, nobody has even opened a thread about this. Here is is: http://www.beximcopharma.com/. Let me apply some of my overly simple heuristics. + This is not a controversial large cap. This is a $120m company that nobody outside of Bangladesh has ever heard of. There is not even a thread about it on CoBF. Consider my interest piqued. + Only tradable in Bangladesh and on the AIM market in London. Great. Hard to buy, more potential for mispricings. + Does it look cheap at first glance? Let's have a quick look on Morningstar and in their latest annual. Ok, this is trading at 0.5x book, 6.5x PE. Looks cheap! + How is the balance sheet? Looks like there are no intangibles, no debt. I like that. + Track record? At first glance: has been profitable for the last decade. During this period revenue quadrupled, earnings per share doubled, book value doubled. - Capital allocation? Looks like they reinvest a lot of money in the business while they only earn 7% ROE. Not optimal but at least they also pay a cash dividend. - Shares outstanding have increased. Looks like they pay a stock dividend. Hmmm. Potential problem. - Insiders? No clue. Need more information. + Any random information? Looks like they just won FDA accreditation. Simple heuristic: makes it less likely this is a complete fraud. My verdict after 5 minutes: looks cheap, warrants another look. I ended up buying it. The best thing about it? Last year it was 40% cheaper than it is now. Traded at 4x PE and 3x EV/EBIT and 0.3x book. Why would I even bother to read a Valeant annual when I can also investigate this opportunity? Why is the Valeant thread 200 pages but is there no thread about this name? My guess: it is much easier and feels much better to follow the crowd into an intellectual dick-measuring contest where you can prove you smart you are. I feel the same way. I enjoy being an armchair Sherlock in this thread but I haven't opened a thread on Beximco. Nevertheless, I try not to let that influence my buying decisions. After all the time I wasted in this topic it is time for some gloating! The suggested VRX alternative is up ~80% excluding dividends while Valeant is down 88% or something. I even got a couple of PM's one year ago from angry VRX holders telling me (amongst other things) that Bangladesh stocks are worth zero and that I should ignore the Valeant GAAP numbers since their real earnings are way higher. FWIW BXP is still extremely cheap and one of my larger positions. Link to comment Share on other sites More sharing options...
Picasso Posted September 28, 2016 Share Posted September 28, 2016 Nice trade/investment/etc. Anytime you get angry private messages over a stock, it's usually going lower. I'm looking at you FNMA. Link to comment Share on other sites More sharing options...
rukawa Posted October 8, 2016 Share Posted October 8, 2016 FWIW BXP is still extremely cheap and one of my larger positions. How did you discover it? Link to comment Share on other sites More sharing options...
Patmo Posted October 9, 2016 Share Posted October 9, 2016 To make up for my horrible Tony Montana mistake I'll try to be constructive for once, and share another pharmaceutical company as an alternative for Valeant. As opposed to the 200-page dicussion on Valeant, nobody has even opened a thread about this. Here is is: http://www.beximcopharma.com/. Let me apply some of my overly simple heuristics. + This is not a controversial large cap. This is a $120m company that nobody outside of Bangladesh has ever heard of. There is not even a thread about it on CoBF. Consider my interest piqued. + Only tradable in Bangladesh and on the AIM market in London. Great. Hard to buy, more potential for mispricings. + Does it look cheap at first glance? Let's have a quick look on Morningstar and in their latest annual. Ok, this is trading at 0.5x book, 6.5x PE. Looks cheap! + How is the balance sheet? Looks like there are no intangibles, no debt. I like that. + Track record? At first glance: has been profitable for the last decade. During this period revenue quadrupled, earnings per share doubled, book value doubled. - Capital allocation? Looks like they reinvest a lot of money in the business while they only earn 7% ROE. Not optimal but at least they also pay a cash dividend. - Shares outstanding have increased. Looks like they pay a stock dividend. Hmmm. Potential problem. - Insiders? No clue. Need more information. + Any random information? Looks like they just won FDA accreditation. Simple heuristic: makes it less likely this is a complete fraud. My verdict after 5 minutes: looks cheap, warrants another look. I ended up buying it. The best thing about it? Last year it was 40% cheaper than it is now. Traded at 4x PE and 3x EV/EBIT and 0.3x book. Why would I even bother to read a Valeant annual when I can also investigate this opportunity? Why is the Valeant thread 200 pages but is there no thread about this name? My guess: it is much easier and feels much better to follow the crowd into an intellectual dick-measuring contest where you can prove you smart you are. I feel the same way. I enjoy being an armchair Sherlock in this thread but I haven't opened a thread on Beximco. Nevertheless, I try not to let that influence my buying decisions. After all the time I wasted in this topic it is time for some gloating! The suggested VRX alternative is up ~80% excluding dividends while Valeant is down 88% or something. I even got a couple of PM's one year ago from angry VRX holders telling me (amongst other things) that Bangladesh stocks are worth zero and that I should ignore the Valeant GAAP numbers since their real earnings are way higher. FWIW BXP is still extremely cheap and one of my larger positions. Nice. On the other hand though VRX could arguably be a good value as well right now. Link to comment Share on other sites More sharing options...
valcont Posted October 9, 2016 Share Posted October 9, 2016 FWIW BXP is still extremely cheap and one of my larger positions. Interesting find but I doubt it'll get much traction. The GDRs are relatively illiquid and looks like the shares can not be held by US citizens. "Because of the following restrictions, purchasers are advised to consult legal counsel prior to making any offer, resale, pledge or other transfer of the GDRs or the Shares represented thereby. The AIM Securities (i.e., GDRs) were offered in reliance on Regulation S. The GDRs may not be offered, sold, pledged or otherwise transferred, directly or indirectly to any person in Bangladesh or the United States, residents of Bangladesh or the United States, or to, or for the account or benefit of such persons. The GDRs have not been, and will not be registered under the US Securities Act 1933, as amended, or with any securities regulatory authority of any state of the United States or any other jurisdiction, and may only be offered, sold or delivered outside the United States to persons other than US persons (as defined in Regulation S) in offshore transactions in reliance on Regulation S, and in accordance with any other applicable law. " Link to comment Share on other sites More sharing options...
writser Posted October 10, 2016 Share Posted October 10, 2016 Beximco was first mentioned by Axel Krohne (link), a great guy to follow if you are interested in some really off the beaten path investments. AlphaVulture also has been covering the stock for a few years: link. And yes, it is hard (impossible) for market participants to buy Beximco and the GDR's are too illiquid anyway for most professionals to be a viable investment. That's one of the main reasons why I think the mispricing exists. Hardly any money manager wants this on their book and 99% of retail investors can't trade this (and 99% of retail investors wouldn't buy a Bangladeshi stock even if you put a gun to their head). And yes, VRX is now certainly cheaper than last year! But honestly, I really don't understand why VRX would even be on your watchlist unless you run a 9-digit fund. This was true a year ago and it still is true today. I strongly feel that for most investors, controversial large caps should only be followed for entertainment and educational purposes. Don't try to make money in the shark cage. Link to comment Share on other sites More sharing options...
Rasputin Posted October 13, 2016 Share Posted October 13, 2016 I think this screenshot from the latest investor presentation sums up my current thoughts on VRX. Jublia used to be the number 2 drug for VRX, as early as last July 2015. http://ir.valeant.com/~/media/Files/V/Valeant-IR/reports-and-presentations/Q22015-earnings-deck-final-august-11-revised.pdf This was one of the cornerstones of their R&D efforts. People can argue about which drugs are going to survive without Philidor (Jublia obviously won't be one of them), but the rot inside a corporation that pulls these kind of moves is too deep for me to ever consider this an investment. Life is just too short to be worrying about whether the execs are lying to you. And after what Papa did at PRGO, I am not sure how you could really consider this new "mgmt"....so that's my two cents. But, I haven't and probably won't have a position anytime in the near future.... How much Valeant spent (including r&d) to get Jublia (see Dow Pharma acquisition Dec 2008) vs how much they have gotten and will continue to get is the key question. Answer: ROI is huge. I'd love to have done the same deal. I haven't posted because nothing new operationally. Valeant has gotten $2.5 B unsolicited bid for various businesses at 11 X EBITDA. Not sure whether the sale will actually go through at that multiple, and what businesses will be sold. Even assuming US diversified is zero, pipeline (including recently launched relistor oral, broda, etc.) is worth zero, valuing Branded Rx at ENDP multiple, B+L/Intl stub is priced at around 13 times 2018 earnings. I'm still buying. Link to comment Share on other sites More sharing options...
fareastwarriors Posted October 17, 2016 Share Posted October 17, 2016 Valeant Cuts Ties With Pharmacy That Distributed Antidepressant http://www.bloomberg.com/news/articles/2016-10-17/valeant-cuts-ties-with-pharmacy-that-distributed-antidepressant Link to comment Share on other sites More sharing options...
rb Posted October 31, 2016 Share Posted October 31, 2016 Keeps getting worse for VRX Valeant Ex-CEO, Ex-CFO Are Focus of U.S. Criminal Probe http://www.bloomberg.com/news/articles/2016-10-31/valeant-ex-ceo-ex-cfo-are-focus-of-u-s-criminal-probe Link to comment Share on other sites More sharing options...
Guest Schwab711 Posted October 31, 2016 Share Posted October 31, 2016 Keeps getting worse for VRX Valeant Ex-CEO, Ex-CFO Are Focus of U.S. Criminal Probe http://www.bloomberg.com/news/articles/2016-10-31/valeant-ex-ceo-ex-cfo-are-focus-of-u-s-criminal-probe Awesome. I look forward to seeing charges. I don't see how they can be charged for anything related to Philidor without the company being fined for improper access to medical records (I think runs ~$25k/record if >150 mishandled/lost). Link to comment Share on other sites More sharing options...
ZenaidaMacroura Posted October 31, 2016 Share Posted October 31, 2016 Mike Pearson is a hero to the Republic. The idea that he is going to be charged with a crime is ridiculous. I'm curious to hear more. Link to comment Share on other sites More sharing options...
rb Posted October 31, 2016 Share Posted October 31, 2016 Mike Pearson is a hero to the Republic. The idea that he is going to be charged with a crime is ridiculous. I'm curious to hear more. Pls don't feed the trolls. Link to comment Share on other sites More sharing options...
DooDiligence Posted November 1, 2016 Share Posted November 1, 2016 Mike Pearson is a hero to the Republic. The idea that he is going to be charged with a crime is ridiculous. I'm curious to hear more. Pls don't feed the trolls. Once again; we find common ground (it's like I'm anti-trolling you...) Link to comment Share on other sites More sharing options...
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