Valeant Pharmaceuticals experienced a major decline in the market, causing the Sequoia Fund, which is worth about $7.8 billion, to lose around $1.2 billion in value.
The Sequoia Fund is managed by Ruane Cunniff & Goldfarb. It has been closed to new investors since 2013. The fund has had one of the best track records on Wall Street since its inception in the 1970s.
The pharmaceutical company fell by as much as 20% following a request from Democrats in the United States House of Representatives to subpoena the company in order to obtain documents concerning increases in the price of drugs. Politicians have been attempting to lower the prices on acquired drugs.
Ruane Cunniff is the largest shareholder of Valeant, holding 33.9 million shares as of late June. In New York as of 2:23 pm Monday, shares for Valeant fell by $35.79, an 18% decline in value. This represents a loss of $1.21 billion for Cunniff.
Richard Cunniff and William Ruane, both of whom have since passed away, founded the Sequoia Fund in 1970. William Ruane was a longtime friend of Warren Buffet from college. Ruane and Buffet met at Columbia University at an investing seminar which was taught by legendary investor and economist Benjamin Graham.
As of June 30th, Valeant Pharmaceuticals represented 29% of the holdings within the Sequoia Fund. The mutual fund has outperformed 99% of its rivals this year and 97% of its competitors during the previous five years. Over the past five years, shares of Valeant had multiplied almost seven times over. Clearly the company and the mutual fund had been performing exceptionally-well.
Unfortunately, that all came crashing down yesterday. It will take a long time for both the stock and the mutual fund to recover from this collapse.
Ruane Cunniff has yet to comment on the situation.