In line with my strategic repositioning, I sold VALEANT that does not offer a dividend (and collapse). I substituted VALEANT by CARREFOUR (french company listed in CAC40) which is since a long time in my watchlist. With this movement I also want to expose myself to the positive context of the French market.
Why I sold VALEANT now?
There were many decisions that resulted in negative consequences for the company. Owing to their failure in fixing the problems effectively and in a timely manner. On Valeant crisis, Warren Buffet commented, “In my view, the business model of Valeant was enormously flawed.” Quoting Ratan Naval Tata, “I don’t believe in taking right decisions. I take decisions and then make them right.”
Reason of Downfall
There is no one single reason we can point out, however there is a combination of many reasons for this downfall. The below chart describes some of the effects these events had on falling stock:
- Delayed earnings report
- Bad earnings
- Debt issues
- SEC investigation
- Senate investigation (criminal probe on drug price hikes)
- Slashing of its revenue guidance
- Class action lawsuit
Total percent change September 2015 to March 2016: -72.5%:
Source: Business Insider
The company cannot afford accelerated top line erosion at a time when it faces so many challenges from interest expense, mandatory debt obligations and rising rates. The company looks poised for a disappointing Q1 result.
In fact, buy VRX was a mistake regardless of the investment strategy
I sold 69 shares $8,56
Why I bought CARREFOUR?
Like all my positions since the beginning of the year, I am Long on CARREFOUR
I bought 47 shares 20,92€ / Dividend yield 3,6%