Glenn Greenberg (Trades, Portfolio), principal of Brave Warrior Advisors, still has a gain of 119% on his largest position, Valeant Pharmaceuticals International Inc. (VRX, Financial), even after its shares plunged 20% Wednesday.
Valeant, a $40.7 billion market cap drug corporation, has a prominent place in the portfolios of numerous hedge and mutual funds tracked by GuruFocus, including Bill Ackman (Trades, Portfolio), John Paulson (Trades, Portfolio) and Ruane Cunniff (Trades, Portfolio). Their portfolios suffered when short-seller Citron Research issued a scathing report accusing the company of stuffing its supply channels, sending the stock down as much as 33% before rebounding.
Yet Greenberg, whose 1.66% of shares outstanding make up 36.6% of his portfolio, giving him the biggest exposure to the company of all gurus, bought at such a low price that he still has a hefty profit. He began buying the company in the first quarter of 2011 when its price averaged just $39 per share and continued adding shares each quarter until the second of 2013, when the price reached $79 on average.
Greenberg began reducing the position in the third quarter of 2013 when the price reached $97 and in the next two quarters when it continued to rise. He added more shares at $128 and $119 in the second and third quarter of 2014 – the only time he paid on average more than Valeant’s closing price of $118.61. He continued selling as the price rose again for the next three quarters, and sold 4.07% of the stake in the first quarter of 2015, when Ackman got involved with the company.
In the second quarter of 2015, he reduced the position another 2.99%, leaving him with a remaining 5,701,010 shares at quarter-end.
In total Greenberg paid on average $57 per share for Valeant, more than doubling his money. His sell price averaged $140.98. To put this in perspective, Valeant shares soared as high as $263.81 in the past year.
Greenberg founded Brave Warrior Advisors in 1984, an investment manager that employs only long equity strategies and basis stock selection on fundamental analysis. Greenberg’s other largest holdings are JPMorgan Chase & Co. (JPM, Financial), on which he has a 5% gain, and Charles Schwab Corp. (SCHW, Financial), which has risen 72% from his average purchase price.
His concentrated portfolio lists only 17 stocks and is valued at $3.6 billion.
Ruane Cunniff, the largest guru holder of shares at 9.9% and second largest of total assets managed at 35.9%, also has an impressive 421% gain on its Valeant investment, buying at an average price of $22 per share beginning in second quarter 2010 when shares averaged just $16.
Ackman, however, has lost an estimated 33% on his average buy price of $177 after today’s plunge. John Paulson (Trades, Portfolio), whose 2.6% of shares outstanding make up 9.49% of his portfolio exposure, has lost an estimated 42% the stock as he paid on average $205 per share. Paulson increased his stake in the company by 339% in the second quarter, to 9 million shares at an average price of $221.
Valeant has a P/E ratio of 101.3, higher than 83% of the companies in the Global Drug Manufacturers – Specialty & Generic industry. Its P/B is 8.2, higher than 87% of other companies, and its P/S is 3.27, higher than 74% of companies in the same industry.
See more of Glenn Greenberg (Trades, Portfolio)'s stocks here.
