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Valeant’s Top Shareholders Are Selling, But Are They Wrong?

Wednesday, November 2, 2016 8:09
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Image of multicolor pills in blister packValeant Pharmaceuticals Intl Inc (NYSE:VRX) is on the move again. Shares of the pharma giant spiked higher in afternoon trading yesterday on a WSJ report that the company was nearing a deal to sell its Salix business to Takeda Pharma for approximately $10 billion.

Valeant shares have been under extreme pressure over the past 12 months in the face of accounting scandals, political pressures from lawmakers, and concerns over its large debt loads. The Salix deal, if completed, would be a large injection of cash, alleviating investor concerns over the company’s financial situation.

Valeant had been trading at a multi-year low before yesterday’s news came out. Notable hedge funds and large institutional holders such as Ruane, Cuniff & Goldfarb’s Sequoia Fund, one of Valeant’s top shareholders, have been cutting losses and fleeing the stock this year.

VRX June 2016 13F Filings

Holder Change in position

Investors should note that Valeant is one of the top 25 holdings within the Sprott BUZZ Social Media Insights ETF (NYSE:BUZ). BUZ utilizes advanced artificial intelligence technology and natural language processing to analyze and measure sentiment across the social media landscape.

Tracking the BUZZ social media insights index (BUZZ), BUZ provides investors with exposure to stocks with the most bullish social momentum, rebalanced on a monthly basis. Valeant had remained out of the BUZZ index through the company’s downturn in 2015.

Interestingly, social sentiment picked up significantly in April this year as investors became bullish on the stock as a value play, propelling Valeant into one of the top holdings in BUZ, suggesting a turnaround may be in the works — and that the recent major shareholder selling might be a mistake.

About the Author: Jamie Wise
jamie-wiseJamie Wise is the Founder of BUZZ Indexes and the President and Chief Executive Officer of Periscope Capital, a Toronto-based hedge fund manager. BUZZ Indexes creates and maintains proprietary quantitative index and portfolio strategies based on Big Data analytics models. Established in 2009, Periscope Capital is an alternative investment asset manager focused on cross-asset arbitrage strategies. Previously, Mr. Wise was a managing director at Moore Capital Advisors Canada, a multi-strategy Canadian-focused hedge fund. Prior to Moore Capital, Mr. Wise was a Managing Director and Portfolio Manager at the Bank of Montreal where he led an internal proprietary trading group. At BMO, Mr. Wise was appointed the youngest Managing Director in the firm’s history. Mr. Wise has an undergraduate business degree (hons.), graduating first in his class from the Ivey School of Business at the University of Western Ontario in 1998. Mr. Wise holds a Chartered Financial Analyst (CFA) designation.
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