Wednesday, November 4, 2015

Valeant will continue on doing business and will be fine

Bill Ackman is convinced that even if Valeant broke the law and has to pay a big fine, it will survive.

“Life will go on for Valeant”

On Friday morning, the usually uber-confident hedge fund manager held a conference call defending his investment in Valeant. At one point in the conference call, Ackman had one of his lawyers run through the various ways a drug company like Valeant can break the law. He also listed all of the big fines that drug companies have paid in the past. Valeant has not admitted to any wrongdoing, and Ackman did not directly accuse the company of any misbehavior. Nevertheless, the call didn’t come off as a ringing endorsement of Valeant.

During the conference call, Ackman said he was sticking with his investment in Valeant. He said the shares were cheap and could rise to $306, which would be nearly tripling from where it is now. But Ackman used Valeant’s measure of cash EPS to get to that assessment. Some have questioned whether that measure overestimates the company’s earnings. Bottom line: As long as you don’t mind investing in a company that was hiding problems from its biggest shareholder, Valeant’s shares are cheap.