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Rekenthaler Report

Sequoia Fund Symbolizes What Was, But No Longer Is

Mutual fund management ain’t what it used to be.

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Old School
You've probably heard about  Sequoia Fund's (SEQUX) woes. The fund's managers had the temerity--or foolishness, you pick the noun--to have more than 30% of its assets in one stock. Unfortunately for Sequoia's shareholders, the company it invested so much in turned out to be  Valeant Pharmaceuticals (VRX). The fund has since shed 25% of its net asset value, courtesy of Valeant's 86% decline.

(The Morningstar equity analyst covering Valeant estimates its fair value to be $115 per share, albeit with so much uncertainty that the Consider Buying price is far lower, at $57.50. Valeant’s current stock price, at the time of writing: $37. Hmmm.)

John Rekenthaler does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.