mercredi 11 mai 2016

Nobilis Healthcare: bullshit detector going mad

First lesson for any investor: If you don't trust management, you shouldn't invest in a business, even if the PE ratio or the ROE look very good.

I've said it numerous times before but I lost confidence in Valeant and Concordia Healthcare this year. I don't care if Concordia Healthcare is being bought by Blackstone. I don't trust this company anymore.

Both CEO's from Valeant and Concordia Healthcare were from Biovail, a company that wasn't clean. You don't find pearls in a pile of shit. Both companies have used weird accounting practices that have been very hard for anybody to understand. Actually, these business are harder to evaluate than banks (which are not that easy to evaluate).

Second lesson: If a management team isn't able to bring you straight numbers, just look somewhere else. You have to be able to understand the health of a company.

And if a management, like the one of Concordia Healthcare is saying bullshit, just sell your shares.

For example, today, the results for the first quarter are out. What does it looks like?

Nobilis increases first quarter revenue by 35%

First, when you see that kind of title, prepare yourself for some deception. If a company is writing mostly about revenue or sales instead of earnings or EPS growth, it's a sign that this business has missed the estimates and uses the numbers that make them look good, without putting any emphasis on the only numbers that matter (earnings and EPS growth). If they don't make money, they'll write a shitload of numbers to drown the awful truth under layers and layers of informations and numbers that don't have (the same) importance.

Please, take a look at this part, which makes my bullshit detector going BEEP BEEP BEEEEEEEEP:

"In the first quarter of 2016, we increased revenue by $13.4 million, or 35%, to a record $51.3 million, driven by increased case flow and a higher average revenue per case. Similar to the first quarter of 2015, we recorded a negative bottom line, specifically a net loss of $5.0 million as compared to $4.5 million in the prior corresponding period," said Harry Fleming, CEO of Nobilis. "In the first quarter, we invested heavily in new technology and infrastructure to support our forecasted growth in 2016, which impacted our bottom line. Additionally, we were still feeling the impact of significant legal and accounting expenses related to the October short attack," said Fleming.

Wow! Revenue is 35% higher but they achieve to get a fucking loss. And they invest heavily in new technology and infrastructure, knowing that the market wants great earnings to compensate for the fact that this company had problems releasing earnings on time in 2015 and chosed in a very strange way to sue some blogger on seeking alpha that wrote that this business was not that clean. And they fucking blame the short attack for their poor results? WHAT THE FUCK!? If the short attack didn't have valid points, why did it had such an importance on the results?

When I saw that shit, I couldn't do anything else than selling my shares. Selling the shares of my father, mother and sister too. I don't want to be associated with that fucking company anymore.

I realize how it's hard to find a great management team behind a great business. And it's not the case here.

4 commentaires:

  1. What is up with the pharma industry?

    Valeant, Concordia, Endo and now Nobilis. If you listen to the 2015 year end conference call from GUD.TO. Johnathan Goodman was right, he said there will be a big shake up and this is exactly what's happening.

    Only pharma company out there I personally trust is Knights Therapeutics. Since inception in 2014 till now they have achieved positive net income, with no debt, and no bs. Management, in particular Johnathan Goodman has an impeccable track record.

  2. In the USA, there's many great pharmas stocks to follow.

    For Canada, you're probably right.

  3. I have some CXR and am planning to hold it for a while. At least it seems it is more ethical less deceiving than Valeant. :)

  4. Good luck with your investment.

    I now believe that Valeant and Concordia are almost exactly the same.