Valeant Pharmaceuticals Intl Inc (NYSE:VRX) is another healthcare company that made the top 20 list, jumping to the 12 spot. The stock slid by some 15% between December 28 and January 4. The company announced last week that its CEO J. Michael Pearson was on medical leave following a severe pneumonia diagnosis. Yesterday, Valeant said that Howard Schiller would replace Pearson as interim CEO. The stock slid by more than 54% in the last six months of 2015, as the company faced scrutiny regarding some of its business practices, but most smart money investors believe the drop to be an overreaction by the stock being targeted by short sellers. Jeff Ubben and Bill Ackman are two of the top shareholders of Valeant Pharmaceuticals Intl Inc (NYSE:VRX). In a recent SEC filing, Ackman’s Pershing Square reported the sale of some 5.02 million shares of Valeant, reducing the stake to 29.09 million shares, equal to 8.5% of outstanding stock. However, the filing stated that the shares were sold for two onshore partnerships, in order to generate a tax loss for their investors before the end of 2015. Overall, 88 funds among those we track held shares of Valeant Pharmaceuticals Intl Inc (NYSE:VRX) at the end of September, down by 10 over the quarter.
In his third-quarter investor letter, Ackman said that Valeant’s large portfolio of products, which could be sold in order to deleverage the company, as well as its cash flow-generating business, among other things, make the stock attractive.
“Once we determined that the risk of financial default was extremely small and the stock was trading at an enormous discount to intrinsic value, we considered various approaches to increasing our investment. Generally, we purchase stocks outright to get exposure to a particular investment. In this case, we took advantage of the high volatility of Valeant stock, its extremely low share price, and the high degree of market uncertainty in choosing to build a position that offered us a compelling reward for the potential risk,” Ackman said.
The investor added that even though Valeant Pharmaceuticals Intl Inc (NYSE:VRX) might register a disruption in its dermatology business, the company still sports strong fundamentals. The agreement with Walgreens Boots Alliance Inc (NASDAQ:WBA) signed in December, will expand Valeant’s reach to customers and will help it to regain credibility through the partnership with the largest pharmacy chain in the US.
“The company will likely file its 10-K in February with the results of Price Waterhouse’s year-end audit. This should comfort investors who have concerns about Valeant’s accounting. While we expect a messy fourth quarter due to the shutdown of Philidor and investigative costs, the company should be able to post “clean” quarters beginning in the second quarter of next year. With the passage of time, the reduction in uncertainty, increased transparency, the reporting of operating results which we anticipate to be strong, along with the deleveraging of the balance sheet, we expect Valeant stock to rise substantially,” Ackman added.
On the next page you can see the full list of top 20 stocks most searched by financial advisors last week.
