Guru Lou Simpson (Trades, Portfolio) ran the Geico insurance, a subsidiary of Berkshire Hathaway (BRK.A) (BRK.B) for more than three decades with outstanding returns. In his 2004 letters to shareholders, Warren Buffett (Trades, Portfolio) dedicated an entire section to Lou Simpson (Trades, Portfolio) called "Portrait of a Disciplined Investor."
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In the letter to shareholders, Buffett had this to say about Lou Simpson (Trades, Portfolio):
“You may be surprised to learn that Lou does not necessarily inform me about what he is doing. When Charlie and I assign responsibility, we truly hand over the baton – and we give it to Lou just as we do to our operating managers. Therefore, I typically learn of Lou’s transactions about ten days after the end of each month. Sometimes, it should be added, I silently disagree with his decisions. But he’s usually right.”
In the fourth quarter of 2015, Simpson added 745,631 shares of Valeant Pharmaceuticals International Inc. (VRX, Financial).
Valeant Pharmaceuticals International is a multinational specialty pharmaceutical company that is based in Laval, Quebec, Canada. The company focuses on specialization in dermatology, eye health, gastrointestinal, neurology and consumer healthcare. The company is international with product sales in North America, Europe, Middle East, Latin America and Asia Pacific.
Valeant Pharmaceuticals International has a market cap of $33.2 billion, a P/E ratio of 66.81 million, an enterprise value of $67.72 billion, a P/B ratio of 5.62 and a quick ratio of 1.50.
The company has a few severe warning signs according to GuruFocus. The cash to debt ratio is 0.05, ranking Valeant Pharmaceuticals below 93% of the companies in the industry. The company is also issuing long term debt, as over the course of the previous three years, Valeant Pharmaceuticals has increased their debt by $17.8 billion. The company's asset growth is also faster than revenue growth, which is noteworthy because this potentially indicates that a company is becoming less efficient.
Below is a Peter Lynch chart for Valeant Pharmaceuticals International.
Simpson gained 31 years of experience at Geico before retiring in 2010. Simpson claims that he retired for one day but he could not handle living the retired life. Shortly after his brief retirement, Simpson founded SQ Advisors in Naples, Florida, an investment firm that caters its services to high net worth individuals.
SQ Advisors currently owns 12 stocks with a total valuation of over $3 billion.
Lou Simpson (Trades, Portfolio) has gained tremendous returns on his investments and Warren Buffett (Trades, Portfolio) believes that Simpson should be in the investment hall of fame. Simpson has been known to go his own way and think differently from the rest of the crowd. I think that has been a major contributor to his outstanding results.
Cheers to your investment success.
