02-11-2015, 05:19 PM
(02-11-2015, 05:16 PM)GFG Wrote: [ -> ](02-11-2015, 05:12 PM)GFG Wrote: [ -> ](01-11-2015, 09:44 PM)HitandRun Wrote: [ -> ]GFG
I, too, like distressed stories. Similarly, I've bought BP when it's down, Jap stocks after the tsunami, Stand Chart after it was whacked in the US, etc.
However, I baulk at VRX because I'm not sure I can understand the business model, especially with critical analysis like this: AZ Value
Thanks for pointing out this article, it's been fun to read.
If I could summarize, the main points of the post are that:
1) Valeant's presentations do not show figures to substantiate their growth rates, the time taken for cash flows to recover Valent's acquisition costs etc
2) In the "rare" event that a slide does show figures, the author compared it to total cashflows in the AR to show that the figures in the slides are overstated. (Most of the examples use only Sanitas as he could get the financials of Sanitas post-acquisition by Valenat)
The author also stated that the figures and data are only in the slides, and not given in the ARs, and he believes the reason is that anything in the AR is legally binding i.e. management could go to jail for falsifying figures in the ARs, but in the slides the figures are not "backed by law" as you could always say they are estimates/there's an error etc
Well, I did delve into the ARs earlier, and there is some important information that the author didn't include in his post. I'd also admit that I havent done a detailed comparison of EACH acquisition, probably not as detailed as him too. Yes, he is right in saying that they have not provided hard figures to show the revenue and earnings of EACH of their acquisitions post acquisition. The ARs tend to lump them into broad categories and to show performance as a group. There can be many many reasons for doing that, and even though I'm vested, I'd be the 1st to admit that at least part of it is shady. part of it could be due to the fact that there're simply too many acquisitions, too much data
And at least a substantial reason I believe, is because it is not in Valeant's interests to let it's competitors and regulators know in exact detail these figures. Think about it, if you are approached to be acquired by Valeant, and you know that just based on cashflow, and that if you cut off R&D, cut headcount, consolidate your distributorships or start utilising specialty pharmas to distribute etc, basically employ the strategies Valeant has been using, (and that everyone knows by now), you could cover the entire acquisition costs within 5,6 years?
Of course you'd either refuse to sell to Valeant, or expect a much higher multiple
Ditto for Valeant's competitors.
The other comment I'd made is that since the author says that the data in the presentations are garbage, and they're not included in the ARs (which are audited) for the sake of legal reasons, then why not accept the data in the ARs? Why doubt the revenue,cashflow etc in the AR and expect a detailed breakdown?
Again, I'd like to say that I do think that some of the things that Valeant did was not right morally. That's probably the reason why they had to go through all these loops to try to hide their shady business. eg. same employee using different names to work at Philidor etc.
But again, I reiterate, my investment thesis is that the price is factoring a doomsday scenario, giving too little credit to the wide variety of assets in its portfolio. They will get a big fine, get negative publicity for a long while to come, but like all things, with time it will disappear.
Which is why I said I am less optimistic than Ackman (of course he has to generally appear much more optimistic to his investors).
I did my own calculations based on cashflow, and a very conservative growth rate (much lower than Pearson's guidance), and looping off a huge MOS to account for potential fines, shareholder lawsuits blah blah and at current $100, I still think it's wide off the mark. even if it recovers to just $150 within a year, that's a 50% ROI.
OK just want to add the latest comments by Charlie Munger pretty up sums up what I feel: may not be right, may not be moral, but no, it's not going to be the end of the road for Valeant just yet.
http://www.bloomberg.com/news/articles/2...lding-nose
Add to that, the fact that the short sellers or panic sellers at least, are basing their decisions on reports from this guy:
http://www.wsj.com/articles/valeant-shor...1446417120
I really wonder why the press doesn't talk about better researched articles like AZ's and instead there's so much focus on this 1 man show Left. With a dismal track record too.