The majority of people around the globe does not known what a stock means, how equity markets work and what their benefits are. Unfortunately, this is a true fact. Of course, people can live their lives happily without ever buying a stock or even without knowing what a stock market is. However, those individuals overlooking equity markets do not fully perceive the potential benefits of investing, as well as the rewards associated with this practice. Small scale investors could start their own investment journeys by channeling some cash into mutual funds, which usually give investors access to diversified portfolios of equities, bonds and other investment securities. However, only 1 % of large-cap mutual fund managers posted gains in the first two months of 2016, so passive management is not entirely great amid a “slow-growth” environment. Interestingly enough, Wall Street analysts and investors believe that 2016 will offer a great environment for active managers, also known as stock pickers. But how can individual investors pick potential winning stocks? The basket of stocks that received the most attention from hedge funds in the fourth quarter of 2015 is one way to identify potential winners. In this article, we use our extensive database of hedge fund holdings to find out what the smart money thinks of Valeant Pharmaceuticals Intl Inc. (NYSE:VRX).
Valeant Pharmaceuticals Intl Inc (NYSE:VRX) was in 83 hedge funds’ portfolios at the end of December. VRX has seen a decrease in hedge fund sentiment recently. There were 88 hedge funds in our database with VRX positions at the end of the previous quarter. At the end of this article we will also compare VRX to other stocks, including Northrop Grumman Corporation (NYSE:NOC), The Blackstone Group L.P. (NYSE:BX), and Travelers Companies Inc (NYSE:TRV) to get a better sense of its popularity.
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It’s already widely known that Valeant Pharmaceuticals Intl Inc. (NYSE:VRX) had a terrible 2015, but billionaire Bill Ackman of Pershing Square Capital Management L.P. continues to be one of the most outspoken supporters of the company. It should be noted that Pershing Square endured its “greatest peak-to-through decline and worst annual performance ever” in 2015, mainly owning to the disastrous performance of the specialty pharmaceutical and medical device company. Valeant’s shares are down by 67% over the past 52 weeks, due to a combination of increased political attention on drug pricing, regulatory scrutiny, criticism and attacks from short sellers, and the termination of the highly-scrutinized distribution arrangement with Philidor. In its third-quarter letter to investors, the billionaire activist investor said:
“When Valeant’s specialty pharmacy (Philidor) and drug pricing controversies came to light, we assessed the impact of these developments on future revenues, earnings and cash flows. While we believe that 2016 cash earnings will likely be somewhat lower than our initial estimate, we do not believe that Valeant’s long-term earnings prospects have materially changed. While there remains uncertainty with respect to Valeant’s business, we believe the company’s business value has grown considerably since our initial investment despite recent negative developments, unfavorable press, some reputational damage, and short-term disruption to the company’s distribution of dermatology products.”
More importantly, Bill Ackman has stuck with the company through both good and bad times, and recently said that “We expect much of the uncertainty will be resolved in the relative short term, hopefully over the next few or so weeks, when we expect the company to issue results, update guidance, and file its 10-K”.
With all of this in mind, let’s analyze the new action surrounding Valeant Pharmaceuticals Intl Inc (NYSE:VRX) and also discuss what a former shareholder of the company had to say about this stock.