As a Canadian, a decent portion of my total portfolio is invested in Canadian Index. Normally dominated by banks, railroads, integrated oil companies, pipelines, insurance cos, and telecoms I've been quite comfortable, but now there is a holding that's become the Canadian stock market darling: Valeant Pharmaceuticals (VRX) and maybe the start of another Nortel story. This company makes up 5.13% of the Vanguard FTSE Canada Index and quite frankly it's a stock that I would never invest in (if index funds did not exist). It's ridiculously overpriced, overhyped and the fundamentals are plain horrible. Currently VRX trades for $256/share on the TSX for a total market cap of $86.49B. Essentially VRX is a company that acquires patents and other companies and is almost a type of pharmaceutical holding co.
First let's look at earnings: Last year it earned $2.67/share so I'm paying almost 100x last years earnings. To make matters worse, it lost money in 2013 and 2012, a combined total of $-3.08/share over those two years. In 2011 it earned a piddly $0.49/share. It lost money again in 2010.
Next let's look at assets: Shareholder Equity currently sits at $5.31B. As far as assets goes, there is $9.34B in Goodwill alone. Intangible assets (patents etc.) sits at $11.25B. Then toss in the $15.23B in long term debt (up from $4B in 2010). This company buys overpriced assets by issuing debt and more common shares, constantly diluting whatever equity there is.
Have any other Canucks noticed this growing problem?