The concentrated nature of Valeant’s ownership may provide some insight into the rapidity of its drop. In the six months prior to its 67 percent decline that began Sept. 18, about half a percent of the company’s market cap traded on a daily basis in the U.S. That figure has since jumped to an average 4.4 percent, a sign to Novus Partners Inc.’s Stan Altshuller that the popularity of the stock among hedge funds accelerated selling on the way down.
“You just wouldn’t see that in less-crowded stocks that active managers do not care about,” Altshuller, chief research officer at Novus, said by phone. “The trading was ridiculously high. Stocks that are highly owned by hedge funds are going to be a lot more volatile in a crowd.”
Some of the stock’s largest investors are known for their value-investor leanings, including the biggest owner: New York- based RuaneCunniff & Goldfarb Inc., which traces its lineage to an early acolyte of Warren Buffett. A firm run by Wally Weitz, a value investor from Buffett’s home town of Omaha, Nebraska, said on Nov. 2 that it exited its remaining investment.
Another value legend, Glenn Greenberg of Brave Warrior Advisors LLC, said in a Bloomberg News interview this week that he’d add to his stake today if it weren’t already so big. Greenberg defended the stock, saying its decline was the result of lazy media coverage of a short seller’s false claims.
It doesn’t help that Charles Munger, Buffett’s longtime business partner, in a Saturday interview with Bloomberg called Valeant’s practice of acquiring rights to treatments and boosting prices legal, but “deeply immoral,” and “similar to the worst abuses in for-profit education.”
Barry Rosenstein’s Jana Partners on said this week it sold its stake in the company after politicians including Hillary Clinton called into question drug pricing practices.
The company is also the focus of two congressional probes seeking to examine why Valeant and Turing Pharmaceuticals AG raised prices of medications sharply after acquiring them.
“I’ve seen a lot of broken growth stocks, that’s not what happened here,” said Michael Sansoterra, a money manager RidgeWorth Capital Management in Atlanta, where he oversees $1.9 billion. “This is not a value stock. This is a stock that’s in no man’s land.”