Opioid Litigation Could Cause Force Big Pharma Firms Into Bankruptcy: Tilson

Whitney Tilson’s email to investors discussing his latest buy recommendation that reminds him of AutoZone, Inc. (NYSE:AZO); stocks that could get walloped by opioid litigation; cutting 300 calories a day shows health benefits.

latest buy recommendation

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1) Last Wednesday, I sent my latest buy recommendation to subscribers of the Empire Investment Report. The company I shared has extraordinary margins, gushes free cash flow, and has bought back 26% of its shares in the past three years, yet trades at less than 10 times earnings. It reminds me a lot of AutoZone (AZO), whose shares have shot up an extraordinary 44 times since I recommended it to my readers in January 2001.

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2) I've long focused on Purdue Pharma for playing a critical role in catalyzing the opioid epidemic that's led to more than 400,000 deaths in the U.S. But many other companies, most of them public (unlike Purdue, which is privately owned by the Sackler family), also played big roles in fueling the crisis. These companies looked the other way while shipping millions of pills to small communities and pocketing billions in profits.

At long last, it appears that they are going to pay a huge price for their terrible behavior thanks to a tidal wave of lawsuits and the damning data recently released from the Drug Enforcement Agency's ARCOS database, which tracks every prescription in the country.

I think these companies could end up like ones that were associated with asbestos, with many stocks destroyed and companies bankrupted. I'd be very cautious investing in the stocks of the following companies that are involved with this mess:

Manufacturers

  • Johnson & Johnson (JNJ)
  • Teva Pharmaceutical (TEVA)
  • Mallinckrodt (MNK)
  • Endo International (ENDP)

Distributors

  • McKesson (MCK)
  • AmerisourceBergen (ABC)
  • Cardinal Health (CAH)

Drugstores

  • Walmart (WMT)
  • Walgreens Boots Alliance (WBA)
  • CVS Health (CVS)

If you think I'm overreacting, read these stories:

3) I've read a lot of studies and articles which show that eating less (i.e., reducing calories) leads to weight loss and better health. Well, duh...

But this article, Cutting 300 Calories a Day Shows Health Benefits, caught my eye for a few reasons:

  1. a) The rigor and quality of the study;
  2. b) The 143 participants in the study were healthy and of average weight;
  3. c) It didn't require extreme dieting: "On average, the dieters managed to slash about 12 percent of their total calories, or roughly 300 calories a day, the amount in a large bagel, a few chocolate chip cookies or a small Starbucks Mocha Frappuccino."
  4. d) Because of this, most participants stuck with it: "For many people, dieting can be an unpleasant experience. But the researchers found that for many of the subjects, caloric restriction was surprisingly not unbearable. While more people dropped out of the diet group than the control group, the study overall had a high retention rate."
  5. e) Despite the moderate level of dieting – basically getting rid of one snack per day – and the fact that the participants were already healthy, the health benefits were HUGE:

... The group saw many of their cardiovascular and metabolic health markers improve, even though they were already in the normal range.

They lost weight and body fat. Their cholesterol levels improved, their blood pressure fell slightly, and they had better blood sugar control and less inflammation. At the same time, a control group of 75 healthy people who did not practice caloric restriction saw no improvements in any of these markers.

Some of the benefits in the calorie restricted group stemmed from the fact that they lost a large amount of weight, on average about 16 pounds over the two years of the study...

The researchers looked at measures of quality of life and discovered that the calorie-restricted group reported better sleep, increased energy and improved mood. Compared to the control group, they did not have significant increases in hunger or food cravings either, Dr. Roberts said.

"There was nothing we measured that indicated that they weren't doing well," she said.

Tomorrow, I'll share my experience with reining in my candy addiction...

Best regards,

Whitney

 




About the Author

Jacob Wolinsky
Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Prior to ValueWalk, Jacob was VP of Business Development at SumZero. Prior to SumZero, Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at)valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver