Where Traders Sold Valeant

This is where I think traders sold Valeant:

vrx

Not at the high, mind you, but on the way down before it went, well, waaaay down. I can’t imagine anyone who’s trading their own money professionally or semi-professionally is actually still long this stock. They can’t possibly be.

Professional traders are not in the “I want to be right” business, they’re in the capital preservation business. Either that or they face involuntary retirement. When a stock is going up, traders are happy to ride along. When it stops going up, traders get out.

For portfolio managers, it’s different.

They learn everything there is to know about the company and read all the research. They conduct their own research. They get introduced to management by the institutional sales-traders who have been turned into matchmakers and concierges in the modern era. When a stock they’ve learned about goes down, they buy even more. They stick to their guns and make some phone calls. They get the “reason” why the stock is down and decide it’s overblown. They talk to their own investors about the “opportunity” the market has created.

Both can be right on different timeframes.

The difference is, the trader doesn’t let herself get associated with a certain position or be forced to explain why her original bullishness is still justified. She sells a stock as it breaks down and, in most cases, forgets all about it. A portfolio manager who’s come out publicly with a positive opinion on that stock doesn’t have the luxury of moving on without losing face in front of investors.

“Who cares what the investors think, cut your losses!” you might be saying.

OK, sure, but not as easy in practice. Because now there is doubt in the minds of the PM’s investors and the leash gets tightened a bit. There is less latitude for future risk-taking now and maybe a couple of dollars of redemptions. The magic man has lost his touch, they’ll whisper.

Optics and career risk are a factor, even though they have nothing to do with whether or not a position should be held or sold.

Here are three small hedge funds that had massive concentrated bets in Valeant this year. They were up huge on the trade and now they’re most likely down huge, in very short order. Can they admit they were wrong and move on? Will they lose fund of funds money in the process?

Running money publicly and going on the record with investors about individual stocks is really difficult. It introduces new elements of difficulty into an already difficult game. Traders on their own, reporting to no one else, don’t have nearly as much trouble exiting a losing situation.

***

This post originally ran here on October 23rd, 2015

Read Also, my Valeant piece for Fortune Magazine, from around the same time, in which I referred to it as:

The Stock That Ate Wall Street (Fortune)

This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.

The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Ritholtz Wealth Management employees providing such comments, and should not be regarded the views of Ritholtz Wealth Management LLC. or its respective affiliates or as a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client.

References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.

Wealthcast Media, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. Investments in securities involve the risk of loss. For additional advertisement disclaimers see here: https://www.ritholtzwealth.com/advertising-disclaimers

Please see disclosures here.

What's been said:

Discussions found on the web
  1. dryer vent cleaning companies commented on Apr 11

    … [Trackback]

    […] Find More here|Find More|Find More Infos here|Here you will find 41313 additional Infos|Infos to that Topic: thereformedbroker.com/2017/03/14/where-traders-sold-valeant-2/ […]

  2. Online Masters Degree commented on Apr 11

    Online Masters Degree

    […]we came across a cool site that you just may possibly appreciate. Take a search if you want[…]

  3. politicheskie slovari commented on Apr 11

    politicheskie slovari

    […]we came across a cool web-site that you may well enjoy. Take a appear in the event you want[…]

  4. Sacramento Taxi airport commented on Apr 11

    Sacramento Taxi airport

    […]although websites we backlink to below are considerably not connected to ours, we really feel they’re essentially worth a go by, so possess a look[…]

  5. 3 ring binder commented on Apr 15

    … [Trackback]

    […] Find More on|Find More|Find More Informations here|Here you can find 51816 more Informations|Informations on that Topic: thereformedbroker.com/2017/03/14/where-traders-sold-valeant-2/ […]

  6. looking for threesome partner commented on Apr 16

    looking for threesome partner

    […]check below, are some totally unrelated web sites to ours, nonetheless, they are most trustworthy sources that we use[…]

  7. Array Questions commented on Apr 16

    … [Trackback]

    […] Read More here|Read More|Find More Infos here|There you can find 86786 additional Infos|Informations on that Topic: thereformedbroker.com/2017/03/14/where-traders-sold-valeant-2/ […]

  8. women's clothing online stores posted on Apr 16

    women’s clothing online stores

    […]The details mentioned within the article are a number of the most beneficial accessible […]

  9. TREATED DIAMOND commented on Apr 16

    TREATED DIAMOND

    […]check below, are some absolutely unrelated internet sites to ours, nonetheless, they are most trustworthy sources that we use[…]

  10. Fresh news commented on Apr 16

    Fresh news

    […]the time to read or go to the material or web pages we’ve linked to below the[…]

  11. used testing machines commented on Apr 17

    used testing machines

    […]we prefer to honor lots of other net websites on the internet, even if they aren’t linked to us, by linking to them. Underneath are some webpages really worth checking out[…]

  12. kalendar na 1908 god commented on Apr 17

    kalendar na 1908 god

    […]Wonderful story, reckoned we could combine a number of unrelated data, nonetheless actually worth taking a look, whoa did 1 find out about Mid East has got additional problerms also […]

  13. strap on harness and dildo commented on Apr 17

    strap on harness and dildo

    […]just beneath, are many completely not related web pages to ours, however, they’re surely really worth going over[…]

  14. Man & Van commented on Apr 17

    … [Trackback]

    […] Read More here|Read More|Find More Informations here|Here you can find 50913 more Informations|Infos on that Topic: thereformedbroker.com/2017/03/14/where-traders-sold-valeant-2/ […]

  15. calendar pazdnikov commented on Apr 17

    calendar pazdnikov

    […]we came across a cool web page which you could appreciate. Take a appear in case you want[…]