RE:Some thoughts for the longs that you all may be interested Doucksoup, I agree on many points and respect your opinion and input. Here are some points where my opinion differs.
All things are not equal on both sides of the border. Canadian are targeted, as is evident in the discrepancy of the sell off between the two groups. VRX has become a poster child for US lawmakers even though there are enough and much bigger examples on their own turf. They tread lightly with their own and attack anyone on the outside. America loves to declare war on everything and today it's a war on Canadian healthcare companies. The proof is that IBB was up 3.7% today, but most Canadian health stocks were shunned and down over 5%.
The 7.25% blended rate should not pose a problem. The new CXR is to generate 870M revenue with margin and cash flow of 90%. That's 783M USD and not including the 60 new drugs. To service all their debt we are talking less than 200M USD annually. That leaves 583M. I don't believe that they are going to cut the dividend as it is such a minuscule amount that the optics are worse.
Acquisitions may be curtailed in the near future, but what no one is considering is the "new" previously unreleased information, that they have 60 new drugs to roll out in the future. Covis, was acquired with 18 drugs for 1.2B. These 60 new drugs may be like 3.3 Covis acquisitions and will most certainly represent additional revenue. That is why I think Mark is anxious to provide guidance. I'm certain it will be positive.
I think your investment will pay off in spades. Just give it some time.
Ducksoup000001 wrote: Yes I am in and out of this stock all through this year until mid August and that made my nvestment in this company terribly under water. But I am still holding on for the following reasons:
1. Too late to sell for me. If it drops from here another 25% to low $30 that is about another 10% from my origin position. And I can tolerate that. However at the moment I will not believe that is going to happen.
2. Short selling is going on every day in any stock market especially true when some bad news or rumour occurs against the targeted companies. In this case it is the whole Heath Care sector in both sides of the border. Look at NHC and VRX. CXR is not immune to it unfortunately.
3. We are investing in a company with an aggressive roll up growth type model. That is great in a bull market in general when hot money is abundant and borrowing cost is cheap. Now the company is facing a much higher cost of borrowing - 7+ % of interest rate. That will consume a good portion of its income/profit going forward for while awhile. Looks like slashing stock dividend may be priced in now. Having said that, I don't see a debt default is in the card as the company at present has no trouble with creditors forcing them to seek Chapter 11 protection.
4. What concerned the market is the amount of debt and a foreseeable trend in slowing down the acquisition activities. That is the real reason behind the quick pullback - institutions will not support or buy in at the high multiples as they did before August, thus the multiple contraction occurred, meaning only sellers and no buyers. I believe the sp has gone down deep enough with today's close - a PE of less than 10 for forward Y2016. Right now the sp is lower than its American peers.
5. My investment could be dead money for awhile with the risk of a bit more pullback assuming the upcoming Company preliminary guidance for 2016 From then on this stock will begin its base building process which is a good test for the longs like me.
Just my opinion based on rational analysis. And if you are treading water holding this stock right now, I feel your pain. But I believe holding on than selling all at the present is right choice for me.