67 WALL STREET, New York - August 9, 2013 - The Wall Street Transcript has just published its Deep Value Investing and Other Strategies Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.
Topics covered: Bottom-Up Stock Selection - Value Oriented Strategy - Value Investing - Deep Value - Small Cap Investing
Companies include: Amtrust Financial Services Inc (AFSI), Questcor Pharmaceuticals, Inc. (QCOR), Novartis AG (NVS), Berkshire Hathaway Inc. (BRK-A), Mohawk Industries Inc. (MHK) and many more.
In the following excerpt from the Deep Value Investing and Other Strategies Report, an expert portfolio manager discusses his portfolio-construction methodology and his investment philosophy:
TWST: Would you provide our readers with some examples of stock holdings that are representative of your investment approach?
Mr. Poma: Yes, the company I'm going to discuss is quite unique for us, in that we wouldn't usually talk about a stock like this because of the fact that we've owned it for three years, and since our initial purchase, it's quintupled in price. But having said that, we still think there is compelling value with large potential upside. This company is Questcor Pharmaceuticals (QCOR).
Questcor is a biopharmaceutical company that focuses on the treatment of patients with central nervous system and autoimmune disorders. Earlier in the interview, I said that we like to find companies that have some sort of edge over their competition that is highly defensible. Well, Questcor's lead drug, H.P. Acthar, fits this bill.
Acthar is a biologic drug with orphan status that's approved to treat 19 different indications. Although Acthar has patent exclusivity on just one of these indications, generic competition has never been able to develop a copied version of this drug. This has to do with the complex makeup of Acthar's 39 aminoacid peptides with impurities that have never been disclosed.
Matching these impurities, which is a task that would be required by the FDA in order for a generic company to get approval, has been basically impossible. Further barriers to generics are a proprietary manufacturing process and required FDA clinical trials, which make us feel comfortable that Acthar won't have a generic competitor for at least the next seven to 10 years, if ever.
Now, Questcor showed up on our radar screen in early 2010. At the time, it sold for $10. It was a debtless company, and they had almost $2 per share in cash on their balance sheet. The company had a consistent double-digit return on equity, high profit margins and had been rapidly growing its Acthar sales. In our research, we concluded that over the next 12 months, if...
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