Sold Valeant to buy Carrefour

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:

  1. Delayed earnings report
  2. Bad earnings
  3. Debt issues
  4. SEC investigation
  5. Senate investigation (criminal probe on drug price hikes)
  6. Slashing of its revenue guidance
  7. Class action lawsuit

Total percent change September 2015 to March 2016: -72.5%:

2383651_14927550956285_rId11

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?

Carrefour SA engages in the provision of supermarkets and retail stores. Its activities include operation and management of hypermarkets, supermarkets, convenience stores, cash and carry stores, and both food and non-food e-commerce websites. The french company was founded on July 11, 1959.
Contrary to what I had anticipated, I decided to proceed to the purchase of CARREFOUR before the first round of the French presidential elections. I decided to take this risk because at the sight of the polls and the feeling that I had the days before the vote, I had a strong feeling that at least one “conventional” candidate were going to qualify for the 2nd round . Which was the case and allowed me to take advantage of the very significant rise this morning (+ 4% at this time). Beyond this short-term analysis, the weak valuation of the company (PER 2018 below 12 versus 17.6x over the last 5 years) and its sustainable yield make it possible to position itself long-term on the value.

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%


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