samedi 20 juin 2015

Some reasons to buy more shares of Valeant

Once in a while, people ask me what they should do with their portfolio. For example: Should they reduce their positions with title A to buy more title B?

The answer is that I know sweet fuck all about your portfolio (how much money you have, how many companies you own, what are your goals, etc) so I don't really know what to answer. I'm not a fucking genius. I doubt about my own choices so imagine how would I feel about my recommandations to people I don't know who own portfolios about which I know absolutely nothing.

You may find it stupid, but as time passes, I attribute more and more importance to the proverb: "The trend is your friend" (for non cyclical stocks of course) and about choices of insiders and superinvestors. I still take a look at metrics before investing, but sometimes, the analysis is hard with conventional metrics. Like it is with Valeant.

Jason Donville once said that Valeant is a great company with complex accounting. It's absolutely true. Few companies use leverage that much. But few companies create this amount of value for their investors.

Recently, I've been buying more shares of Valeant for these reasons:
  • Of course, Valeant operates in healthcare which is my favorite field of investment (non cyclical);
  • Forward PE ratio is about 18 which is reasonable;
  • Michael Pearson (CEO) has said recently that the stock was still undervalued;
  • Three insiders have been buying the stock since may 27th 2015 (1,7M$, 260 000$ and 3M$);
  • Jason Donville recently said that the stock was still one of his top picks;
  • Three of my favorite superinvestors (that achieve great returns year over year as said in a recent post on this blog) own big positions of their portfolio in Valeant;
  1. Robert Goldfarb (Sequoia Fund): 30%
  2. Bill Ackman: 26%
  3. Lou Simpson: 13%
Nobody among these three guys has sold a share of Valeant in the last quarter. Even more, Lou Simpson added to his position in the last quarter and Bill Ackman has INITIATED a 26% position in the last quarter (an investment of more than 5B$!).

With these guys beside me, I feel pretty safe. It's one of my advice to you: sometimes, it may be a good idea to select an investment in which you'll have great companions. These guys had excellent returns in the last few years and if they have so much money invested in Valeant, it's surely because they believe that it's one of the best companies to contribute to their returns.

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