13-F Alert: Hedge Funds Flee Valeant Pharmaceuticals

May 16 2016 | 11:42pm ET

Quarterly securities filings show that some of Valeant’s long-suffering hedge fund investors finally threw in the towel or cut their stakes significantly during the first quarter, while a few intrepid others have taken contrarian positions in the embattled Canadian pharmaceuticals company. 

Brahman Capital, for instance, sold 8.2 million shares in the period, according to its most recent 13-F filing. Brahman, founded by Mitchell Kuflik, Peter Hochfelder and Robert Sobe in 1989, held Valeant for more than five years. At the end of last year, the fund’s Valeant position accounted for around one-third of the fund’s $3.3 billion in U.S. equities. The position was liquidated, according to Reuters. 

Glenn Greenberg’s Brave Warrior, which has been a Valeant investor for more than four years and invested approximately 25% of its $3 billion in capital at one point into the firm, cut its holdings by 67%, or 4.2 million shares, according to its filing. Meanwhile, Senzar Asset Management also exited its position, having sold 1.3 million shares.

The list goes on. Viking Global Investors, JANA Partners and Iridian Asset Management all closed their positions, selling 7.8 million, 1.6 million and 4.3 million shares, respectively. 

Valeant, which was one of the hedge fund industry’s darlings well into 2015, stumbled badly last year on alleged accounting and pricing irregularities. The stock has fallen more than 86% in the past year, dragging the returns of a number of well-known fund managers down with it. 

Nonetheless, the company’s fall from grace has attracted some contrarian interest. Appaloosa Management’s filing revealed a $25-million bottom-fishing position as of March 31, while Okumus Fund Management brought its stake up to 3.7 million shares. Farley Capital increased its stake by 38% to 378,458 shares while also buying call options on 17,000 shares. And the fund often considered to be the biggest Valeant bull of all, Bill Ackman’s Pershing Square Capital Management, retained its 9% stake.

SEC 13-F filings are required by money managers overseeing more than $100 million in equities in the U.S. The forms are filed within 45 days of the end of each calendar quarter, and list stocks as well as options and convertible bonds owned by the manager. Although rearward looking, they nonetheless offer insights into what changes have been made to the portfolios of large investment managers, and what they see as upcoming opportunities. 


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