It’s been 1 month since my previous post on Valeant. Since then, the share price has done this:
Mostly hovered between $30-$40, and now it has dipped below where we were at 1 month ago. So what has transpired?
- Filed 10-k on time, as promised
- Earnings write down in 10-k
- Attacked by Charlie Munger and Warren Buffett
- Set up committee to look into drug pricing
- New CEO papa officially started work
- Release of emails detailing Ackman’s conversations with Mike Pearson
The 10-k IMO, didn’t have too much of a surprise. Sure, the projected earnings have decreased, and the markets reacted negatively. But I was expecting lowered earnings to begin with. Wasn’t it obvious? Kinda surprised the markets reacted the way they did.
Since the 10-k filing, the share price has been dropping on every possible news. Even news that I didn’t think was necessarily bad or surprising.
It dropped on lowered projections. Sure, but wasn’t it expected? Also, at current prices, the PE is < 3. That’s how ridiculous it is. Sure it’s non GAAP, but all the other major pharma uses non GAAP earnings too, including the supposedly more respected Allergen. If anything, the current scrutiny is good because it tells me the non GAAP earnings have been dissected and examined in any possible manner.
Attack by CM and WB. They were speaking of the old M&A type of Valeant. Surely this would be a different animal now.
The share price dropped on news that a new committee will look into drug pricing. Why is this even an issue? Isnt it expected? They’ve already made the promise to do so during the congressional grilling.
New CEO started work, promptly went on Cramer’s CNBC show to talk about Valeant. Nothing concrete on his plans yet, just the usual vague stuff about “engaging stakeholders, doctors, patients etc”
The release of emails with Ackman talking about VRX and MP, in a supposedly negative manner, caused the share price to tank further. Why? I have no idea. It’s just a case of jittery markets. I read through all the released emails. Aside from the entertainment value, the tone itself doesn’t make me more worried about the company. I really don’t see how some emails can throw color on the current valuations or the future of the company.
In the past month, I’ve been accumulating VRX at prices between $29 – $32. I currently own 3,600 shares of VRX. I honestly don’t see why VRX should be falling on any of these news. None of them strike me as particularly worrisome.
VRX has stated that the FY16Q1 results will be filed on or before 10th June, well ahead of the deadline. The guidance is for 2.3-2.4B of revenue, with earnings of $1.30-1.55.
Will VRX prove to be immensely undervalued / incorrectly priced by the markets at current prices ($27++ now)? Or would it prove to be a value trap and go down to $0 and the slippery road to bankruptcy?
This is as contrarian as it gets. Let’s see.