01-04-2017, 09:35 AM (This post was last modified: 01-04-2017, 09:44 AM by weijian.)
Bill Ackman documented down his lessons learnt from the 4bil Valeant mistake in PSH AR16. His main takeaway was a misjudgement on Mgt abilities and their previous superior record was not good enough to guarantee future outperformance or guard against potential variability (regulatory laws, downward spiral of morale etc).
On a personal basis, i thought the very high level (simpler) lesson learnt would be simply to have the ability to take a loss (either admit Mr Market or the many other equally brilliant minds taking the opposite side of the trade, may be right). On hindsight, if he didnt double down via options to try to recoup losses, he would only lose about half what he finally lost.
Psychologically, it isnt easy to take losses (loss aversion or ego, whichever it may be) and so as much as for all of Bill Ackman's mental superiority, i reckon this is a good example that emotional makeup is similarly an essential ingredient for investment success.
(24-03-2016, 01:16 PM)BlueKelah Wrote: Sounds like poor portfolio management. In hindsight they had plenty opportunity to rebalance even before valeant hit more than 10% of their portfolio. I would think for billion dollar fund that diversifying and rebalancing is the norm. they got too greedy this time?
berkshire still doing well right?
at least for PSH, it is business as usual for taking highly concentrated bets.
excerpt from PSH's AR16 chairman's message: As I have stated in the past, the concentrated nature of PSCM’s portfolio is likely to lead to lumpy investment performance on both the upside and the downside. Over the Company’s four-year history we have experienced both extremes. The Board believes that the Investment Manager’s strategy of holding a concentrated portfolio of investments in companies where it can help create shareholder value is sound, and should yield superior results over the long run.
01-04-2017, 11:51 PM (This post was last modified: 02-04-2017, 12:45 AM by specuvestor.)
VBs know why I think Ackman deserve it but it's sad to see Sequoia Fund go down with it together with the "name" of value investors, though William Ruane legacy is cemented
What's unsaid is whether Sequoia is a precursor for Berkshire when Buffett and Munger is no longer around
(01-04-2017, 09:35 AM)weijian Wrote: Bill Ackman documented down his lessons learnt from the 4bil Valeant mistake in PSH AR16. His main takeaway was a misjudgement on Mgt abilities and their previous superior record was not good enough to guarantee future outperformance or guard against potential variability (regulatory laws, downward spiral of morale etc).
On a personal basis, i thought the very high level (simpler) lesson learnt would be simply to have the ability to take a loss (either admit Mr Market or the many other equally brilliant minds taking the opposite side of the trade, may be right). On hindsight, if he didnt double down via options to try to recoup losses, he would only lose about half what he finally lost.
Psychologically, it isnt easy to take losses (loss aversion or ego, whichever it may be) and so as much as for all of Bill Ackman's mental superiority, i reckon this is a good example that emotional makeup is similarly an essential ingredient for investment success.
Before you speak, listen. Before you write, think. Before you spend, earn. Before you invest, investigate. Before you criticize, wait. Before you pray, forgive. Before you quit, try. Before you retire, save. Before you die, give. –William A. Ward
An old read and most probably most people knows the story now, but Bethany Mclean has a wicked pen.
Sometimes not been kind to your regulators and your regulator's customers (ie. the voters) may eventually come around. Valeant did it via exploiting tax loopholes and also raising prices on a captive patient group. It is clever on paper, but in practice, provides no value to its regulator and her customers (voters).
Reminds me of a simple litmus test for OPMIs when analyzing businesses - Is the company providing value for the products/service that the customer is purchasing?
THE VALEANT MELTDOWN AND WALL STREET’S MAJOR DRUG PROBLEM
(07-06-2017, 08:44 PM)weijian Wrote: An old read and most probably most people knows the story now, but Bethany Mclean has a wicked pen.
Sometimes not been kind to your regulators and your regulator's customers (ie. the voters) may eventually come around. Valeant did it via exploiting tax loopholes and also raising prices on a captive patient group. It is clever on paper, but in practice, provides no value to its regulator and her customers (voters).
Reminds me of a simple litmus test for OPMIs when analyzing businesses - Is the company providing value for the products/service that the customer is purchasing?
THE VALEANT MELTDOWN AND WALL STREET’S MAJOR DRUG PROBLEM
05-10-2017, 09:05 AM (This post was last modified: 05-10-2017, 09:05 AM by weijian.)
Valeant Digs Into Its Leverage Spiral
Valeant Pharmaceuticals International Inc. has made some not-terrible business moves in the past few months.The troubled pharma firm has divested assets, raising cash to pay down debt. It has avoided big, public scandals over its accounting. It hasn't filed for bankruptcy.But Valeant is still saddled with falling sales and $28.2 billion in debt. Now it wants to borrow more money to pay down near-term loans and extend its corporate life for another few years -- its second such maneuver this year.
Valeant dramatically increased its debt in 2014 and 2015 as it made corporate acquisitions. Valeant is selling $1 billion of senior secured notes due in 2025, with the goal of redeeming debt maturing in 2020. In other words, it's kicking the can down the road, giving itself a few more years to grow into its massive debt load.The company is lucky and taking advantage of a frothy time in credit markets; bond buyers are still so desperate for any asset that provides any income at all that they're apparently willing to accept a 5.625 percent coupon on the new bonds, according to price chatter reported by Bloomberg News.
But let's be clear: Valeant is still paying more than it would have back in 2015, when it sold $2 billion of unsecured bonds with a coupon of 5.375 percent.
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