Yesterday’s headline-making news that Canadian pharmaceutical company Valeant is in a bit of a precarious situation produced a 50% drop in the stock and some serious relative underperformance in our point-and-figure charting:
Given the tendency of stocks in the same sub-industry to move in similar fashion, we thought it might be useful to take a look at the group in order to gauge whether or not this is merely an outlier or a bonafide leader– in other words, how worried should we be about the pharmaceutical sub-industry (a group that has returned more than 92% over the last four years)?
With a few exceptions (Johnson & Johnson, Taisho, Novo Nordisk?), the bulk of this group– across all developed markets– appears headed for more challenging times. Most of the constituents here are at and/or testing various measures of technical support (Lilly, Astellas, Roche?), if they are not in the beginnings of a downtrend already (Perrigo, Santen, Shire?).
Has an important leader in the outperformance of counter-cyclicals abdicated its position? The outlook appears decidedly less optimistic than it did just six months ago.