Francis Chou (Trades, Portfolio)’s Toronto-based fund announced this week that it bought two new drug manufacturers in the first quarter, along with adding to stakes in oil and gas and a notoriously troubled pharmaceutical company.
Chou makes all of the investment decisions for the $620 million he manages at Chou Associates. A deep-value investor, Chou discussed his interest in pharmaceutical companies in his 2016 annual letter:
“As if Valeant has not given enough pain and anguish to our unitholders, we believe pharmaceutical stocks as a group are selling at attractive valuations, even when you take the debt into consideration. They generate their earnings in cash and some of them are down more than 50% from their highs, which is what caught our attention initially. It may look like we are adding more emotional fuel to the fire from our experience with Valeant but we look at mispriced stocks on a case-by-case basis. To avoid getting caught with Food and Drug Administration (FDA) approval and patent expiration issues, we will be using a basket approach.”
New Buys
Chou purchased 950,000 shares of Endo International Plc (ENDP, Financial), a 3.58% portfolio weighting. The company’s first-quarter average share price was $12.
Endo International Plc has a market cap of $2.82 billion; its shares were traded around $12.62 with and P/S ratio of 0.69.
Chou purchased 215,000 shares of Teva Pharmaceuticals Ltd. (TEVA, Financial), a 2.33% portfolio weighting. The company’s first-quarter average share price was $34.
Teva Pharmaceutical Industries Ltd. has a market cap of $31.48 billion; its shares were traded around $30.43 with a P/E ratio of 3043.00 and P/S ratio of 1.31. The trailing 12-month dividend yield of Teva Pharmaceutical Industries Ltd. stocks is 4.47%. The forward dividend yield of Teva Pharmaceutical Industries Ltd. stocks is 4.28%. Teva Pharmaceutical Industries Ltd. had an annual average earnings growth of 7.40% over the past 10 years.
Increases
Chou purchased 108,383 shares of SandRidge Energy Inc. (SD, Financial), increasing the position to 156,623 shares, a 0.98% portfolio weight. The company’s first-quarter share price average was $20.
Sandridge Energy Inc. has a market cap of $709.55 million; its shares were traded around $19.79 with and P/S ratio of 2.16.
Chou purchased 393,000 shares of Valeant Pharmaceuticals International Inc. (VRX, Financial), increasing the position to 2,353,843 shares, an 8.76% portfolio weight.
Valeant Pharmaceuticals International Inc. has a market cap of $4.6 billion; its shares were traded around $13.27 with and P/S ratio of 0.52. Valeant Pharmaceuticals International Inc. had an annual average earnings growth of 23.8% over the past 10 years.
See Francis Chou (Trades, Portfolio)’s portfolio here.
