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According to Bloomberg, The Sequoia Fund lost $1.2 billion on its investment in Valeant. That’s a big loss for the 7.8 billion Sequoia. Bloomberg says that Valeant represented 29 percent of the fund’s holdings. That’s an unbelievably big bet for a fund that’s so highly respected. Is this accurate? [If so, this fund's Great Owl Fund status should be revoked.]
Yes, SEQUX does have 29% of its portfolio in Valeant. However, look at the great (relative to the market) YTD performance of SEQUX, which probably is mainly due to Valeant. And look at Valeant's great YTD performance of +33%.
I wouldn't say that SEQUX "lost" $1.2B on Valeant. They have probably gained a lot on Valeant since purchase, although I don't have the purchase date. Gained a lot, then gave back some in the past week, month, 3 months.
The "loss" in the past week and past month is a paper loss only. I seriously doubt that SEQUX has sold the position while it has been down......
My issue really becomes the idea that the Valeant business model is the perfect target for politicians. It does little in the way of R & D and basically snaps up drugs/treatments/companies and raises prices. Some people have problems with "platform companies", but Danaher (DHR) has been successful for decades. When you apply that business model to the healthcare industry it's just ripe for controversy.
And maybe nothing happens with the subpoena that Valeant got yesterday, but I think the controversy and debate over that company is not likely over.
Also, for a company of Valeant's size, it's an unbelievably volatile stock.
I'm taking Sequoia off my watch list. I'm not keen on focused funds. Too volatile and subject to serious downside if managers make a mistake (think Longleaf Partners and General Motors; or Dell, for that matter).
Sequoia has made a ton of money long-term off Valeant. A larger question is whether one should seek to profit off a company that's business is essentially being a corporate raider and tax evader. This explains why Valeant has been so successful:business.financialpost.com/investing/skin-in-the-game-how-valeant-is-using-low-canadian-taxes-to-become-a-global-dermatological-power The basic strategy of Valeant has been to acquire other pharmaceutical companies, lay off tons of workers and game the tax code with complicated tax inversions to avoid paying the government anything on its profits. I recently spoke with a fairly prominent, politically conservative money manager--I won't say who--that questioned this as a viable future business model. One, regulators are catching up with the tax gaming. And two, acquisitions are often done with debt--Valeant's debt/equity ratio is 4.7. Such a strategy works better in a low interest rate environment than a high. Moreover, Valeant's does very little R&D, its management thinking that is an outdated model. It basically contributes little to improving people's healthcare, and instead acts as a corporate raider much like the legendary raiders of the 1980s, costing many people their jobs.
I remember Warren Buffett singing the praises of SEQUX during the recession...hmmm...interesting, considering he is a vocal proponenet of everyone paying his/her "fair share". Thanks for the background info @LewisBraham!
I remember Warren Buffett singing the praises of SEQUX during the recession...hmmm...interesting, considering he is a vocal proponenet of everyone paying his/her "fair share". Thanks for the background info @LewisBraham!
Buffett is a tremendous example of say one thing, do another. I believe Buffett has recommended Sequoia as a Berkshire alternative for quite some time.
Too bad some of the other Berkshire alternatives (Loews, Leucadia) have done poorly in recent years.
@little5bee: "I remember Warren Buffett singing the praises of SEQUX during the recession"
@scott: "I believe Buffett has recommended Sequoia as a Berkshire alternative for quite some time."
I've never seen or heard Buffett recommend SEQUX, and would love to see this in writing or hear him.....do you have a reference, source or URL that I can read? Or a URL to an interview of his where he recommends it?
Buffett certainly has some unsavory aspects to him. He's also been party to the Heinz acquisition which has cost a lot of people their jobs. That doesn't mean he lacks good qualities, though. He's a human being like everyone else. In fairness, he recommended Sequoia long before it held Valeant and knew its founders personally so he has an actual connection to the firm.
@little5bee: "I remember Warren Buffett singing the praises of SEQUX during the recession"
@scott: "I believe Buffett has recommended Sequoia as a Berkshire alternative for quite some time."
I've never seen or heard Buffett recommend SEQUX, and would love to see this in writing or hear him.....do you have a reference, source or URL that I can read? Or a URL to an interview of his where he recommends it?
"Sequoia Fund was founded by Richard Cunniff and William Ruane, a friend of Buffett’s since both studied under legendary value investor Benjamin Graham at Columbia University in 1951. When Buffett shut down his investment partnership in 1969 to concentrate on Berkshire Hathaway, he recommended that his clients invest with Ruane. “Bill formed Sequoia Fund to take care of the smaller investor,” Buffett writes in an e-mail. “A significant percentage of my former partners went with him and many of those still living have their holdings of Sequoia.”
@scott thanks for looking up the info for me! I just remembered seeing Uncle Warren on CNBC and recommending it. It was open then and he was touting it as a fund that invested the same way that he did...interesting comparison, considering the back story on this thread.
@scott: yes, I'm quite familiar with the history of the fund, and Buffett closing down his partnerships and recommending the investors go with Bill Ruane. I was referring to any recent recommendations of SEQUX by Buffett.......say in the past 5 years.....
@little5bee: "I just remembered seeing Uncle Warren on CNBC and recommending it. It was open then"
Do you recall approximately what year that was little5bee?
Comments
I wouldn't say that SEQUX "lost" $1.2B on Valeant. They have probably gained a lot on Valeant since purchase, although I don't have the purchase date. Gained a lot, then gave back some in the past week, month, 3 months.
The "loss" in the past week and past month is a paper loss only. I seriously doubt that SEQUX has sold the position while it has been down......
Cheers,
My issue really becomes the idea that the Valeant business model is the perfect target for politicians. It does little in the way of R & D and basically snaps up drugs/treatments/companies and raises prices. Some people have problems with "platform companies", but Danaher (DHR) has been successful for decades. When you apply that business model to the healthcare industry it's just ripe for controversy.
And maybe nothing happens with the subpoena that Valeant got yesterday, but I think the controversy and debate over that company is not likely over.
Also, for a company of Valeant's size, it's an unbelievably volatile stock.
I'm taking Sequoia off my watch list. I'm not keen on focused funds. Too volatile and subject to serious downside if managers make a mistake (think Longleaf Partners and General Motors; or Dell, for that matter).
The basic strategy of Valeant has been to acquire other pharmaceutical companies, lay off tons of workers and game the tax code with complicated tax inversions to avoid paying the government anything on its profits. I recently spoke with a fairly prominent, politically conservative money manager--I won't say who--that questioned this as a viable future business model. One, regulators are catching up with the tax gaming. And two, acquisitions are often done with debt--Valeant's debt/equity ratio is 4.7. Such a strategy works better in a low interest rate environment than a high. Moreover, Valeant's does very little R&D, its management thinking that is an outdated model. It basically contributes little to improving people's healthcare, and instead acts as a corporate raider much like the legendary raiders of the 1980s, costing many people their jobs.
Too bad some of the other Berkshire alternatives (Loews, Leucadia) have done poorly in recent years.
@scott: "I believe Buffett has recommended Sequoia as a Berkshire alternative for quite some time."
I've never seen or heard Buffett recommend SEQUX, and would love to see this in writing or hear him.....do you have a reference, source or URL that I can read? Or a URL to an interview of his where he recommends it?
Thanks!
"Sequoia Fund was founded by Richard Cunniff and William Ruane, a friend of Buffett’s since both studied under legendary value investor Benjamin Graham at Columbia University in 1951. When Buffett shut down his investment partnership in 1969 to concentrate on Berkshire Hathaway, he recommended that his clients invest with Ruane. “Bill formed Sequoia Fund to take care of the smaller investor,” Buffett writes in an e-mail. “A significant percentage of my former partners went with him and many of those still living have their holdings of Sequoia.”
@little5bee: "I just remembered seeing Uncle Warren on CNBC and recommending it. It was open then"
Do you recall approximately what year that was little5bee?
Thanks!
no, it was definitely not in the last 5 years...more like the '08-'09 bottom. I think the fund was probably bleeding assets and needed some inflows.
Is Your Small-Cap ETF Now A Biotech ETF?
http://www.mutualfundobserver.com/discuss/discussion/23079/is-your-small-cap-etf-now-a-biotech-etf
http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2015/09/valeant price chart.jpg