Lessons From Investing in Valeant Pharmaceuticals

5 Lessons From Investing in Valeant Pharmaceuticals

Beginner

As I previously opened up about my horrific Valeant Pharmaceuticals story, I committed to compiling a list of the lessons I’ve learned over the course of my holding period of the infamous VRX shares.

So, here’s a list of what I’ve learned – and how, by now knowing these things, I am ultimately a better investor despite my 85% loss.

  1. Only invest money that you are 100% comfortable with losing 100% of. Because chances are, when you’re speculating, you could very well lose your entire investment. Come to terms with what you may be doing is speculating and not investing.

  2. Set a stop-loss limit sale on a “fun money” growth stock. Sure, you may tell yourself (like I did, a thousand times) that the stock will bounce back. But it’s just as, if not more, easy for the price to continue declining than it is to jump back up.

  3. If you realize you made a mistake when your investment has dropped 50%+, then sell and be done with it.

  4. Sometimes it’s easier to reallocate your capital into a better-positioned stock to make up the loss you’ve incurred. Take advantage of that realization.

  5. Don’t invest in an equity that doesn’t return cash in the form of a distribution. While you may be down on an investment for a long time, a dividend will at least pay you to wait as you decide what you’ll be doing with the stock or holding it. I also like to believe it indicates shareholder appreciation from the company / management. It’s also much easier to stomach a huge decline in your stock’s market value with a dividend.

There were a ton of warning signs throughout my holding term, and I heeded none of them; too stuck in the DGI mentality of “Hold the stock as it comes back up” – but it never came back up. And worse of all, I never received a dividend from the company. It was not a DGI stock and so it should not follow DGI rules.

While the money would have served me far better earning me a big juicy dividend indefinitely, the lessons I’ve learned will help prevent me from continuing to make the unintelligent decisions I’ve accrued in the past year.

Now that I’ve gotten rid of my VRX shares, and deleted them from my Google Portfolio; my returns are finally in the green, and it feels pretty damn good. Throughout the majority of the past year my portfolio has been pretty deep in the red, but since February everything has bounced back with a vengeance and my latest investments have performed very, very, very well.

I’ve made up all of my losses now due to almost all of my stock purchases since January 2016 returning 10% to 30% so far and with my lifetime dividend returning around $1000 after calculating this month’s dividends. Thanks to learning from my mistakes, this entire ordeal can be seen as a miniature blip in my investment track record.

This past March marks my 1-year investing anniversary when I bought my shares of Vanguard Total Stock Market Fund (TSE: VUN) and sold not long after to switch to a DGI strategy. VUN shares have not moved much at all since then.

The habit of investing monthly has now been ingrained into my being, I believe. At this point, it’s sort of on auto-pilot, and I find the most helpful things to do for myself right now on this investment journey is to constantly recompile my monthly stock watch lists, pick out a high-quality name in that list and put my money where my mouth is.

Maybe things will get more exciting over time, but for now I’m content with sitting back and investing here and there, tracking my annual dividend progress meticulously, and ultimately reaching for financial independence over the next 10+ years. I’m ahead of my own schedule still, and really hope to keep up the hard work I’ve put into my portfolio so far.

I remember when my net worth used to fluctuate around $20 per day when I started investing. It now fluctuates in the $100 – $300 range per day without scaring me, often times flying to around $400 – $600 on volatile days. It really goes to show you how money really does make money. I’m excited to see daily fluctuations in the thousands come up. Might take a while, but I’m coming for it. I’m not in a rush. There’s no need to obsess over the numbers. They’ll come when they do. I just do my best and wait it out.

I wish the best of luck to all of you in doing the same.

Does anyone else have a horror story investment they’d like to share? Let me know in the comments section.

Dividend Beginner

A 22 year old Canadian dividend growth investor striving for early financial independence; building as many passive income streams as early as possible.
Previous
Dividend Cut: Whitecap Resources (WCP)
Next
Dividend Growth Investing Tips That Shouldn’t Be Forgotten
  • Beginner,

    It’s a hard lesson to learn but I think most have seen it with an item or two in their own portfolios. I myself learned that lesson with WindStream in my first year of investing. Thankfully I wasn’t playing with much at the time but I can imagine how it would have felt if I had thrown more at it. The market is a fickle beast. I think however that Valeant may see a come back. It will take awhile to recover but I think they’ve got the juice left in them to go for another run.

    • Hey DR,

      I’m not as optimistic about VRX’s future as you seem to be. I’m very glad to be rid of that laggard in my portfolio. It also took a lot of time to monitor and keep up-to-date with new things coming out every day. Glad to have the opportunity to invest my attention elsewhere.

  • Hey DB, thanks for sharing those lessons 🙂 No investor will have a perfect record, and there’s a huge chance one (or more) of your current or future investments may turn out horribly. But that’s just part of investing and allows you to learn lessons like you have.

    Tristan

  • I really like lessons 2 and 4. 4 is probably my favorite. Just gotta move on and find a better investment after a beat down happens. I have had a few of those myself too!

    JT

    • Hey JT,

      After selling Goldcorp I realized that #4 is a huge deal. The chance to have another go with the same money when you realize it’s not working out is an incredibly realization and I think about it sometimes now with investments I made that I’m not too thrilled about today.

Leave a comment

Your email address will not be published.

Archives




Finance Blogs

Disclaimer

My publishings on dividendbeginner.com references an opinion and is for information or entertainment purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice. I am not responsible for any decisions you make concerning finances, taxes, or investments. You must perform your own research and always take caution when extending capital.