Spot the red flag – Valeant 2015

Tell me where I’m going to die, that is, so I don’t go there.
– Charlie Munger

I’m planning to make this a series*. I hope looking at the “graveyard of capital” will make my actions more cautious. This should makes me a better Investor, as we know, rule no. 1 is not to loose money.
It’s always easier in hindsight but would you invest in this company based on this report?

*Btw. other companies I later want to look at are: Enron, Banca Monte dei Paschi di Siena, Saipem, Lehman Brothers …


But let’s begin with this: Valeant in Feb 2015

Valeant 2014 Annual Report (link)

Report Date: February 25, 2015

Price then 190 US-$

Valeant Chart.PNG


  • 5 pages “Advertisement” in the front of the Report
  • extreme outperformance of the stock
  • no dividends paid since 2010
  • super strong revenue growtt
  • good OI in 2014
  • more shares outstanding (not dramatically)
  • 0,3 bn Cash vs 0,9 bn Interest expense (page 48) !
  • Total debt 15.2 bn (page 52) (~twice revenue, 7,5x operating income)
  • issuing high yield bonds 6,5%, 7,5% (page F-51)

Valeant numbers.PNG

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