In a previous article we discussed some reasons why Bill Ackman (Trades, Portfolio) initiated a position in Valeant Pharmaceuticals International (VRX, Financial) to $3.87 billion, according to the fund's latest filing.
On Friday, shares were down about 2% to $228.83. According to the Wall Street Journal, there was a potential buyout offer to buy animal-health giant Zoetis (ZTS, Financial). Someone who is behind this move is activist investor Bill Ackman (Trades, Portfolio), who has taken a $2 billion stake in Zoetis and wanted the company to sell itself. Mr. Ackman also owns 5.7% of Valeant.
Valeant has made several acquisitions in order to become a leader in the market, with a market share of about 20%. It has acquired privately held Bausch & Lomb, a leading ophthalmology company, with the aim to reach economies of scale and synergies in this market. As an example, in mid-March the company closed an $11 billion acquisition of Salix Pharmaceuticals, after failing in an attempt to acquire Allergan (AGN, Financial).
Zoetis, a $25 billion market cap, plunged 12% on Friday, and maintained its previous level before the rally. The firm is the largest leader in the global animal health industry with almost one fifth of the market share. As economies of emerging markets are improving we expect more meat-heavy diets. In such markets, the firm has a scale which allows it to use its own salesforce. This is important because other competitors that are smaller need other expensive distributors.
Valeant is Pershing Square's first largest holding in its portfolio so let´s take a look at other funds which held the stock in their portfolios too. I always like to see which hedge funds have long positions in the stock because it inspires me to track the positions of famous hedge fund managers. Why? Because trying to imitate them, facilitates the task of picking “winning” stocks. But remember, 13F filings disclose hedge fund long positions in equities, ADRs, call and put options, as well as convertible notes. However, funds do not disclose short sales, which are the other (big) part of the story.
Having said this, we will see which funds invest in the company, apart from Pershing Square. Jeffrey Ubben´s Valueact Capital kept the second place with a value of $3.85 billion, with no activity in the quarter, but its position represents 21.3% of its total portfolio. Glenn Greenberg (Trades, Portfolio)´s Brave Warrior Capital had the third largest position in Valeant pharmaceuticals even after reducing its position by 5% to $1.17 billion. The stake represents 35.6%, which means that future performance will be very tied to the stock´s price evolution (the same will happen with Jeffrey Ubben´s portfolio).
Stephen Mandel´s Lone Pine Capital and Andreas Halvorsen (Trades, Portfolio)´s Viking Global both decreased their stakes in Valeant Pharmaceutical by 33% and 56%, respectively. Clearly, these two hedge fund managers had strong bearish sentiment about the stock.
Boykin Curry's Eagle Capital Management also decreased the stake but to a lesser extent, only by 4%, the value of the stake amounted to $751.1 million. On the other hand, D.E. Shaw increased its position by 81% to $613.5 million with 3.09 million shares.
To complete the list of the top ten hedge fund´s holding according to value, we must mention that David Cohen and Harold Levy´s Iridian Asset Management decreased the stake by 23% to $604.5 million, holding 3.0 million shares as well as Peter Adam Hochfelder´s Brahman Capital who did the same by 29% to $521.0 million and 2.62 million shares. Finally, Jonathan Auerbach´s Hound Partners upped its position in Valeant Pharmaceuticals by 23% to a value of $524.9 million with 2.6 million shares.
Other hedge funds managers such as Jim Simons (Trades, Portfolio), John Paulson (Trades, Portfolio), Louis Moore Bacon (Trades, Portfolio), Jeremy Grantham (Trades, Portfolio), Lou Simpson (Trades, Portfolio) and the funds Diamond Hill Capital (Trades, Portfolio) and Private Capital (Trades, Portfolio) have increased their previous positions in the stock in the first quarter of 2015.
On the other hand, George Soros (Trades, Portfolio) and Steven Cohen (Trades, Portfolio) sold out the stock in the first quarter. Considering that Valeant has gained an interesting 38.8% in Q1, I think it was a wrong move.
Disclosure: Omar Venerio holds no position in any stocks mentioned.
