I could only imagine what would have happened if Valeant had issues with safety disclosures like the other pharma companies did. The shorts and the NYT would be calling for the public hanging of the CEO
I (think I) understand your thesis, however: (1) "Past performance is not a guarantee of future performance". What if regulators decided to take a harsher stance with VRX than other drug companies? For example, as I've posted previously, what if VRX was fined $1 million per instance of wire/mail fraud, and had a fine measured in several billion dollars? (2) More importantly, this isn't just about the insurance fraud concerns, it's about the change to VRX's future earnings. 2a: With a lower stock price, its ability to grow earnings via acquisition seems diminished or even eliminated. 2b: Lower earnings due to severing ties with Philidor. In any case, due to the high volatility the stock has experienced, and could continue to experience this week, it's entirely possible the stock could provide profitable buying opportunities, just based on an oversold bounce, and nothing else. The stock was as high as $127.08 on Thursday, 35% higher than Friday's closing price. If it got back to $127.08 this week it would be difficult to determine if this was based on an oversold bounce, or based on fundamental factors. Disclosure: no position in VRX .
1. That's possible, but when a stock is in a panic people will get emotional and overestimate that chance of that happening. Furthermore a lawsuit that is not settled (your scenario) is likely to take even longer than one with a settlement (due appeals, etc). So we are talking about 4-5 years in the future. In the mean time the company will continue to produce cash 2a. IIRC VRX only did 2 acquisitions with stock over the last few years. Its not a major part of their business model. If you recall VRX didn't get AGN exactly because their stock was undervalued and they didn't want to raise their bid. Then someone else came in with the higher bid and got AGN 2b. This will happen. They lost 7% of revenue, but that is fine because they will find alternative ways to ship the drugs they were shipping with phillidor. Those ways won't be as agressive so they wont recoup it all and the growth rate of those revenues will be smaller but all these concerns are already taken care of by the valuation as of now. Thats what some shorts miss, they think they can keep bashing and it doesn't matter where the stock trades at. The oversold technical position (along with the consensus bearishness) provides an extra return for the investment. No just the company looks good on a valuation basis, it also looks good due the likelyhood of a technical bounce. I'm not saying it will come from $93 (it could come from $81 back to $95) but on average its a good idea to fade extreme sentiment
VRX has traded upto 99.99 pre-market this morning Also the below could provide a bit of a bid in the stock, especially for those that panicked with the "bombshell" report that was promised by Citron today http://www.wsj.com/articles/valeant...ning-of-bombshell-report-on-monday-1446417120
I bought a tiny amount in the after market on Friday but 75 is where my ears perk up and 75 to 50 is where I apply size, should the mis-pricing continue. But I seriously doubt it will go lower, 100-ish is likely about it to build a position. In my opinion, which is not worth much, I suppose, Left is indeed a short term catalyzer that covers into his reports but not a credible source; conversely the sophisticated investors involved are reliable. Pg 29+ shows some valuation work http://assets.pershingsquareholdings.com/2014/09/Investor-Call-re-Valeant-Pharmaceuticals.pdf, ...& I find that more reliable than a hissy fit from a neurotic individual. Since I am in the business of finding "opportunity", I will position long At the end of the day it is a conglomerate of the various companies (read cash-flows) acquired. Baush&lomb, that is some serious entrenched quality. Company is a cash cow, management impresses me. (New) risk is that somehow the late developments lead to an impairment of those cash flows or more to the point of the growth of those cash flows. That is impossible for an outsider to assess, particularly w/out yuuuuge amounts of work. Fortunately, my friends at Pershing Square & Sequoia, have
I am now small-ish sized long VRX and do not have any particular need for an immediate move. Absent a reversal of sentiment (eg short covering & new participants buying so-called value), the shares should remain at these depressed level for some time & the upside catalyst is most likely to be a slow working earnings news flow revealing strong cash flows and increased ability to deleverage to near investment grade before additional acquisitions. There are plenty of potential tape bombs left as continued false accusations of improper or illegal behavior are to be expected. I will use those, if they occur, as buying opportunities to build into my ideal position size. Trade time horizon is 2 to 5 years (investment scale)
Heck yeah! Disappointment we did not get one last breach of the prior low & panic move, that would have been one insane opportunity. Half-insane will have to do it seems