Valeant Pharmaceuticals International Inc. a money shredder

May 16th, 2016 – 1 Comment

No oil painting


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Lou Schizas is an equities analyst, investor, entrepreneur, professor and television and radio personality – and a true believer in the happiness-inspiring powers of capitalism.


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BAUSCH + LOMB VALEANT PHARMACEUTICALS INTERNATIONAL LOGO

Hi Lou!

Help me understand valeant pharm. please! Just because it had some bad news lately‎, the stock price surely doesn’t reflect the real value?
Shouldn’t this be an opportunity waiting to happen?

Listening faithfully!
Jim

 

Hey Jim,

 

Thanks for the assignment and your support of AM640! Both are greatly appreciated! This will be the second time that I audit the situation at Valeant Pharmaceuticals International Inc. (VRX TSX). The first was on November 11, 2015 when the shares were trading for $110.76. Syl wanted to know if it was time to get back into VRX.

The research conducted on Syl’s behalf indicated that the MACD and the RSI generated sell signals in August of 2015. The stock pulled back from a 52- week high near $347.84 and melted through support along the 50 and 200-day moving averages by late September. In late October a death cross formed alerting investors that sellers were in control of the market.

It was also noted that the shares had been oversold for three- weeks pointing to a buyers strike and that there was scant evidence of a trend reversal in the short term. What did transpire was a sharp bounce off the lows which ran out of gas by the end of December 2015.

2016 has been a slaughterhouse for invested capital as VRX has found new lows. Another look under the hood of the stock will help identify if there is an opportunity to be found in the rubble.

 

VRX

The three-year chart illustrates the waterfall decline that has dominated the chart since February of this year. In late March of 2016 the MACD and the RSI both generated buy signals as the shares were oversold. However the pop was short lived as the advance met resistance near $50.00

 

 

 

 

VRX2

The six-month chart highlights the move out of the oversold condition in late March and the resistance that came in near $50.00 At the time of this analysis there are no indications that we can expect a trend reversal in the near future.

In response to your concern about bad news being insignificant to the valuation of the shares I think you might be in denial. The issues surrounding VRX are both complex and worrisome. There is a lot of dirt stuck to this lollipop and you shouldn’t be ignoring it.

Finally there is an old saying in technical analysis, ” in the price there is much knowledge.” The premise is that all the information related to an investment is baked into the price. Ignore the price at your peril.

Next time I will investigate the case for Alix Resources Corp. (AIX TSXV) on task from Ricardo.

Make it a profitable day and happy capitalism!

 

 

 

 

Categories: Pharmaceuticals
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