The Morning Brief: Valeant Shares Resume Their Free-Fall

April 19, 2017   Stephen Taub


Shares of the drugmaker owned by ValueAct and dumped by Pershing Square closed at less than nine bucks apiece on Tuesday.

It looks like there is no prescription for stopping or slowing the hemorrhaging in Valeant Pharmaceuticals International’s stock. Shares of the ailing drug company fell another 5.6 percent on Tuesday and are now down to $8.95 per share. This works out to a more-than 38 percent drop in the stock this year alone, after it plummeted 86 percent in 2016.

According to published reports, Deutsche Bank lowered its price target on the stock from $19 to $18 and maintained its hold recommendation. At current prices, this suggests the bank is still counting on the stock nearly doubling from here over the next year. Don’t forget that just a little more than one month ago, Jeffrey Ubben’s ValueAct Capital bought an additional 3 million shares, mostly for $10.81 per share, boosting its stake to a little less than 18 million shares, or 5.2 percent of the total. This means the stock is now down more than 17 percent since the San Francisco hedge fund firm boosted its commitment to the stock. Ouch! Of course, Bill Ackman’s Pershing Square Capital Management is now out of the stock completely.

___

Speaking of Ackman, he enjoyed some good news on Tuesday when Credit Suisse raised its price target on Restaurant Brands International from $53 to $60. In a note to clients, the bank explained it updated its model for the company, which owns and franchises Tim Hortons and Burger King restaurants to reflect the planned acquisition of Popeyes Louisiana Kitchen. However, Credit Suisse maintained its neutral rating due to "our ongoing concerns around slowing sales trends" at Tim Hortons Canada and "limited visibility into store growth acceleration at that brand."

At year-end, the stock accounted for 31.6 percent of Pershing Square’s stock portfolio, which contained eight individual issues. Shares of Restaurant Brands rose slightly on Tuesday, to $56.71.

___

Credit Suisse raised its price target on hedge fund favorite Apple from $160 to $170 and raised its estimates after updating its model for the company’s services business, stressing it continues to believe "the market underestimates the gross profit contribution." It adds that the market "underappreciates its growth potential and the annuity-type business it drives in terms of retention and replacement across the business."

At year-end Apple was the seventh most popular stock among hedge funds after being the most popular stock the previous quarter. Shares of Apple are up about 22 percent year-to-date.

___

Perceptive Advisors reported that as of March 8, it owned 2.15 million shares of Ocera Therapeutics, or 9.11 percent of the clinical stage biopharmaceutical company that focuses on developing therapeutics to treat serious diseases in areas of high unmet medical need. The hedge fund firm, headed by Joseph Edelman, did not own any shares of the company at year-end.


Related Articles


Latest Poll

How will hedge funds finish 2017?

 - 69%
 - 14%
 - 17%

View previous results