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Why Traders Are Selling Valeant Pharmaceuticals Intl Inc (VRX)

Valeant Pharmaceuticals Intl Inc (NYSE:VRX) has fallen 4.67%, or $0.48 per share, to below the psychologically important $10 level on Wednesday after The Australian reported that various bidders have offered under $1 billion for Valeant’s iNova segment. If true, the bids are under what many market participants expected — generally the Street has estimated the iNova unit to bring in around a billion dollars if sold. Valeant Pharmaceuticals Intl Inc (NYSE:VRX) could have used the extra money raised to deleverage its balance sheet. Although management has promised $8 billion of asset sales, Valeant has only sold $2 billion so far. The slow pace of asset sales may be concerning some traders on the Street.

Due to the fact that it is struggling to grow sales and to be profitable enough to please the market, garnering top dollar for the assets it sells is important for both sentiment and Valeant’s future debt financing.

What Does The Smart Money Sentiment Say?

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 39.7% gains over the past 12 months and outperformed the 24.1% gain enjoyed by the S&P 500 ETFs. Our enhanced small-cap hedge fund strategy returned more than 45% over the last 12 months and outperformed SPY by more than 30 percentage points over the last 4.5 years (see details here).

According to our data, the smart money wasn’t too optimistic on Valeant. Of the 742 elite funds we track, 39 were long Valeant Pharmaceuticals Intl Inc (NYSE:VRX) at the end of December, down 19 funds from the previous quarter. Hedge fund super-star Bill Ackman‘s Pershing Square also sold out of its position recently.

The Bottom Line

Valeant Pharmaceuticals Intl Inc (NYSE:VRX) shares have dipped below the $10 mark due to negative sentiment stemming from an Australian report. For more reading, check out ‘11 Most Sold Non Prescription Drugs‘.




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