Hedge Funds Are Dumping Valeant Pharmaceuticals Intl Inc (VRX); Should You?

We at Insider Monkey have gone over 700 13F filings that hedge funds and prominent investors are required to file by the government. The 13F filings show the funds’ and investors’ portfolio positions as of September 30. In this article we will look at what those investors think of Valeant Pharmaceuticals Intl Inc (NYSE:VRX).

Teva Pharmaceuticals TEVA Drugs

Valeant Pharmaceuticals Intl Inc (NYSE:VRX) was in 88 hedge funds’ portfolio at the end of September. VRX has seen a decrease in activity from the world’s largest hedge funds lately. There were 98 hedge funds in our database with VRX positions at the end of the previous quarter.

Follow Bausch Health Companies Inc. (NYSE:BHC)

If you’d ask most shareholders, hedge funds are perceived as slow, old investment vehicles of yesteryear. While there are over 8000 funds with their doors open today, Experts at hedge fund tracking site Insider Monkey look at the bigwigs of this group, about 700 funds. These hedge fund managers have their hands on bulk of all hedge funds’ total asset base, and by keeping track of their top picks, Insider Monkey has deciphered numerous investment strategies that have historically exceeded the market. Insider Monkey’s small-cap hedge fund strategy surpassed the S&P 500 index by 12 percentage points per year for a decade in their back tests.

With all of this in mind, let’s take a glance at the new action regarding Valeant Pharmaceuticals Intl Inc (NYSE:VRX).

How are hedge funds trading Valeant Pharmaceuticals Intl Inc (NYSE:VRX)?

Heading into Q4, a total of 88 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -10% from one quarter earlier. With hedgies’ sentiment swirling, there exists a few key hedge fund managers who were boosting their holdings substantially.

When looking at the hedgies followed by Insider Monkey, Pershing Square, managed by Bill Ackman, holds the biggest position in Valeant Pharmaceuticals Intl Inc (NYSE:VRX). Pershing Square has a $3.47 billion position in the stock, comprising 24.9% of its 13F portfolio. The second-largest stake is held by ValueAct Capital, led by Jeffrey Ubben, holding a $2.67 billion position; the fund has 15.6% of its 13F portfolio invested in the stock. Some other hedgies that are bullish consist of John Paulson’s Paulson & Co, Stephen Mandel’s Lone Pine Capital and Glenn Greenberg’s Brave Warrior Capital.

Because Valeant Pharmaceuticals Intl Inc (NYSE:VRX) has faced declining sentiment from the entirety of the hedge funds we track, it’s safe to say that there was a specific group of hedgies that slashed their full holdings at the end of the first quarter. It’s worth mentioning that Barry Rosenstein’s JANA Partners sold off the largest position of the 700 funds tracked by Insider Monkey, worth about $298.3 million in stock, and Joshua Kaufman and Craig Nerenberg of Brenner West Capital Partners was right behind this move, as the fund dumped about $129.8 million worth of shares. These moves are intriguing to say the least, as total hedge fund interest fell by 10 funds at the end of the third quarter.

Let’s also examine hedge fund activity in other stocks similar to Valeant Pharmaceuticals Intl Inc (NYSE:VRX). We will take a look at Kinder Morgan Inc (NYSE:KMI), Abbott Laboratories (NYSE:ABT), ConocoPhillips (NYSE:COP), and Danaher Corporation (NYSE:DHR). This group of stocks’ market valuations are similar to VRX’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
KMI 72 1826860 8
ABT 55 2077991 6
COP 44 1237571 1
DHR 53 1976453 0

As you can see these stocks had an average of 56 hedge funds with bullish positions and the average amount invested in these stocks was $1780 million. Kinder Morgan Inc (NYSE:KMI) is the most popular stock in this table. On the other hand ConocoPhillips (NYSE:COP) is the least popular one with only 44 bullish hedge fund positions. Compared to these stocks Valeant Pharmaceuticals Intl Inc (NYSE:VRX) is more popular among hedge funds. Considering that hedge funds are fond of this stock, it may be a good idea to analyze it in detail and potentially include it in your portfolio.