Thinking of Buying Valeant? Consider These 2 Stocks Instead

These two companies also have a remarkable track record, but aren’t quite as polarizing.

| More on:

There is perhaps no other company in Canada as polarizing as Valeant Pharmaceuticals (TSX: VRX)(NYSE: VRX). As an example, two famous hedge fund investors in the United States, Bill Ackman (who owns a sizable stake) and Jim Chanos (who is betting against the company), disagree on where the stock price is headed. Both of them are very well respected, but at least one of them will be wrong about Valeant.

If you’re thinking of siding with Mr. Ackman, then it’s clear that a strong management track record is more important to you than a company’s transparency. You’re also willing to pay a premium price for a company that’s performing well. So with that in mind, you may want to consider these two names instead.

1. Brookfield Asset Management

Like Valeant, shares of Brookfield Asset Management (TSX: BAM.A)(NYSE: BAM) have done extraordinarily well, returning 19% per year over the past 20 years. Over a time period this long, you can’t claim that luck is involved; such a track record can only come from buying and selling assets smartly.

Also like Valeant, Brookfield is a very difficult company to figure out, with numerous moving parts and changes to its organizational structure. Investors who own the stock are owning it for its track record.

Fortunately, Brookfield is not so expensive. After adjusting for the public companies it owns, it trades at only about 15 times forward earnings.

2. Constellation Software

Anyone who has owned Constellation Software (TSX: CSU) for five years or more has been richly rewarded. The company originally became public back in 2006 at less than $20 per share, and eight years later now trades at nearly $250.

The company’s success comes from CEO Mark Leonard and his management team smartly buying up software companies, typically for under $5 million, and them letting run on their own. Needless to say, it’s worked wonders.

As a bonus, there aren’t the same transparency issues with Constellation that come with Brookfield and Valeant; the company is very straightforward with investors. Unfortunately, Constellation’s shares are very expensive. Last year, the company made $4.39 per share in income and just under $10 per share in free cash flow. These are fairly small numbers for a company with a $247 share price. But if the company can continue to grow as it has in the past, then the shares are undervalued.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Benjamin Sinclair holds no positions in any of the stocks mentioned in this article. Tom Gardner owns shares of Valeant Pharmaceuticals. The Motley Fool owns shares of Valeant Pharmaceuticals.

More on Investing

A cannabis plant grows.
Cannabis Stocks

Canopy Growth Stock Is Rising But I’m Worried About This One Thing

Canopy Growth stock is soaring as the legalization effort makes real progress in both Germany and the United States.

Read more »

young woman celebrating a victory while working with mobile phone in the office
Investing

3 Roaring Stocks to Hold for the Next 20 Years

These top TSX stocks are excellent long-term buys, given their multi-year growth potential and solid underlying businesses.

Read more »

Two seniors float in a pool.
Dividend Stocks

TFSA: How to Earn $1,890 in Annual Tax-Free Income

Plunk these investments into your TFSA to earn passive income and avoid the taxman.

Read more »

grow dividends
Investing

Here’s My Top 3 TSX Stocks to Buy Right Now

Even though the TSX has been rising, there are still some good bargains out there. Here are three top compounding…

Read more »

Target. Stand out from the crowd
Investing

Prediction: This Canadian Growth Stock Could Double by 2030

Alimentation Couche-Tard (TSX:ATD) is a top growth stock that could do well over the next six or so years.

Read more »

Businessman holding AI cloud
Tech Stocks

Could Investing $20,000 in Nvidia Make You a Millionaire?

Nvidia stock has made investors millionaires in the last 10 years. Is it too late to invest to become a…

Read more »

Engineers walk through a facility.
Dividend Stocks

1 TSX Stock I Wouldn’t Touch With a 10-Foot Pole

AtkinsRéalis (TSX:ATRL) is one TSX stock I'd never invest in.

Read more »

money cash dividends
Stocks for Beginners

Have $500? 3 Absurdly Cheap Stocks Long-Term Investors Should Buy Right Now

If you're looking for cheap stocks, these three have a huge future ahead of them, all while costing far less…

Read more »