Medicure – Uncovering Value in a Hidden Asset

Written on . Posted in Featured Company, Pender Blog

Medicure Inc (MPH), a company that we have held across multiple funds for over two years, is a specialty pharma company focused on cardiovascular solutions based in Winnipeg, MB. Medicure is “our kind of bio-tech company”. Our investment thesis was based on Medicure having a R&D-light business model, limited regulatory risk and an owner-operator with significant skin in the game. 

Medicure had two main assets:

  • The North American distribution rights to a drug named Aggrastat, an anti-coagulant (blood thinner) primarily used in emergency rooms directly after a patient has experienced a cardiac arrest.
  • An investment in a generic drug manufacturer named Apicore, based in India.

On Tuesday (October 3, 2017), Medicure sold its entire interest in Apicore for US$105 million, representing nearly a 100% return on its investment in under one year. However extraordinary that return may seem, we are left scratching our heads as the stock is down over 5% after the announcement. It seems the market does not like 100% IRR’s. And it is precisely this kind of investor behavior that makes investing such a peculiar activity.

In particular, short term market reaction is seldom tied to reality but is more often tied to a change in expectations. This subtle but important difference is the same reason many of us find that the movie is never as good as the book. A book lets the mind wonder, enabling the reader to create her own details of reality, whereas a movie’s reality is set in stone – there is nothing left for the imagination. Medicure set in stone the valuation of a hidden asset leaving no ability for the investor to conjure up his own perfect ending.

Sure, one could argue that Medicure gave up some future growth potential in the Apicore business, but the reduction in leverage and cash optionality the company has today is what makes us excited. Even better, a CEO that is driven by value creation and deems that everything is for sale, at the right price, is what makes our collective hearts sing. We happily hold on to our position with increased confidence in an owner-operator that just made a 100% IRR capital allocation decision and a company that now has money in the bank to both protect on the downside and smartly deploy for the upside.  

David Barr & Kenndal McArdle
October 4, 2017

EnerNOC – A Double-Take

Written on . Posted in Featured Company, Pender Blog

A first for Pender as a company held in both our Equity and Fixed Income portfolios gets taken out.

Demand-side energy management firm, EnerNOC, has announced it is being acquired by Enel Group, a European utility operator. The company was held in both the Pender Corporate Bond Fund and the Pender Value Fund, and this investment showcases the unique cross-over approach of the Pender investment team.

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Pender’s Summer Holiday Reading List 2017

Written on . Posted in Book Reviews, Pender Blog

Summertime is a slower time of year for travel for us. Fewer companies to see, conferences to attend or clients to meet with. This gives us the opportunity to use this time to dive deeper into areas or topics that can “sharpen the investing knife”. This summer there are a couple of books on our list that are relevant to the current market environment.

We have signed up with so that any time one of the books featured is purchased using the embedded links, Pender’s portion of the profits will be donated to the Vancouver Food Bank. We are a participant in the Amazon Associates Program, an affiliate advertising program designed to provide a means for us to earn fees by linking to Amazon and affiliated sites.

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Whole Foods – Amazon’s big move into the grocery value chain

Written on . Posted in Featured Company, Pender Blog

Whole Foods (NASDAQ: WFM) is the second announced takeout of a top five Pender Value Fund holding last quarter (following the Panera deal – see our blog post). WFM is also a holding in the Pender US All Cap Equity and the Pender Strategic Growth & Income Funds. But unlike PNRA, we are pleased about this announcement.

WFM is a great company, but in our view, as an independent entity, it was no longer a compounder because its best growth days were in the rear view mirror. Nevertheless, we are always on the lookout to buy a cheap stock if we believe it can reach its fair value in a timely fashion and provide a reasonable return. WFM was an attractively priced stock because the company was going through some challenging times. Ultimately, we believed that either management would be able to fix the issues, or someone else would. That “someone else” is now Amazon.

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