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Strategies & Market Trends : Ted Warren's Investolator
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From: Investolator20245/12/2024 7:26:51 PM
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investolator2000

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In 2015 Bill Ackman bought Valeant (the ticker symbol back then was VRX, now it is BHC) at an average price of $190 because he thought it was a "bargain" based on the "fundamentals" of the company. If he bothered to check the long-term chart, he would have found out it was not a bargain at $190 and instead he should have bought it at $15 and change in 2009 when it was just breaking out of a long-term triangle base.

As you'll notice from 2009-2015 the stock was in an uptrend (making higher highs and higher lows) then in September 2015 the trend finally ended with the stock breaking below support as an obvious sell signal. Rather than recognizing his mistake, Ackman stubbornly held on until eventually selling out of his position at $11. If he bought it when it was actually a bargain and sold when the stock gave a sell signal he would have had a 1,064% gain in six years. Instead he had a huge loss because he relied solely on his evaluation of fundamentals. In my opinion the only fundamentals even worth looking at are growth rates in earnings and/or sales as really big winners like TSLA in 2019-2021 or SMCI in 2021-2024 tend to have above average growth rates (as well as long-term base breakouts - SMCI for instance broke out of a six year long base in 2021). Fundamentals that are used to determine whether something is a "bargain" are useless (unless your name is Warren Buffett) because you can simply look at a long-term chart to determine whether something is a bargain or not. In any case long-term price action always trumps a typical person's evaluation of fundamentals - never buy something just because the fundamentals "look good".
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