5 Best Canadian Stocks to Buy Now

4. Bausch Health Companies (NYSE:BHC)

No of HFs: 40

Total Value of HF Holdings: $1.60 Billion

BHC was mentioned as one of Billionaire John Paulson’s Top 5 Stock Picks. The top hedge fund holder of this stock is John Paulson’s Paulson & Co. which had $401 million invested in the stock at the end of September. An insider purchased 948,353 shares at around $19 in June 2020. The stock is down 36% since then. Chou Associates Management mentioned a few of their comments in the stock in their Q2 2020 investor letter.

“In early August, Bausch Health Companies Inc. announced that it is planning to spin off its eye care business, Bausch + Lomb, into an independent publicly traded company. This will allow the company to concentrate on its gastroenterology, aesthetics/dermatology, neurology and international pharma business.

Chairman and CEO Joseph Papa said, “We’ve looked at the value of our pure health companies like Alcon and Cooper and believe that Bausch + Lomb would compare very favorably when investors have an opportunity to make a judgment about the relative value of the stand-alone business”.

Comparables like Cooper Companies and Alcon Inc. are currently trading between 18 and 20 times EBITDA. If Bausch + Lomb trades at similar multiples as a stand-alone company, the total value of Bausch Health using sum-of-the-parts method, net of debt, should be worth north of $35 per share, as an inference. For a long time we have felt that Bausch was undervalued, but the investors were not giving credit that management has done a good job in running the operations, selling non-core assets, as well as de-leveraging its balance sheet. They felt the process was too slow, we hope the spin-off of Bausch + Lomb unit will be the catalyst that is needed for investors to price the company closer to its intrinsic value.”