Valeant Shares Plummet on Revenue Scandal

 

VALEANT PHARMACEUTICALS

(VRX, $96.01, down $22.60 midday)

Shares of Valeant Pharmaceuticals fell a shocking amount this week, under allegations that revenue numbers have been falsified.

I repeatedly urged investors to buy Valeant Pharmaceuticals from January 2013 through January 2014. On January 21, 2013, when the share price was $63.77, I told investors, “I expect the VRX price to rise from here, possibly aggressively.” The stock began a long uptrend. 

On March 3, 2014, I removed my buy rating on VRX, after the stock rose 124.8% to $143.36. Earnings growth projections were decreasing, and debt levels were increasing, partly due to the company’s 2013 Bausch & Lomb acquisition. I said, “current shareholders should hold their shares for further gains, and use stop-loss orders to protect profits.”

On Nov. 17, 2014, I reiterated to investors that I would avoid VRX shares until the debt ratio improved. The debt ratio never did improve; it finished 2014 at 74%. The stock traded down & sideways for the immediate nine months after I removed my buy rating, then eventually rose as high as $263.81 in August 2015, before the recent decline, followed by this week’s plummet. 

There might be some near-term gambling opportunities in VRX shares, but normal stock investors should steer clear. You don’t need to take on crazy amounts of risk in order to make money in stocks. If you have a penchant for buying bargain stocks after their prices have suffered, you can find such stocks by subscribing to my new stock advisory, Smart Investing in Turbulent Times. Take a look at the Buy Low Portfolio. It includes stocks that fell a lot, like VRX, but which are also way past any recent bad news, and heading back into a few years of strong projected earnings growth, which should turn the stock prices upward. Join us for better investment ideas! (10-22-15)

Chart courtesy of StockCharts.com.

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Happy investing!

 

Crista Huff

President

Goodfellow LLC

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