Hedge funders can turn into frenemies really quick if an investment goes south

Hedge fund land is a dog eats dog world at the end of all things.

The recent plight of hedge fund darling, Valeant Pharmaceuticals - whose stock has plummeted over 50% since October 21 - has erased $40 billion in three months for hedge fund owners, wrote Bloomberg's Oliver Renick.

And now no one wants to buy into the "toxic" stock.

That's leaves a group including Pershing Square Capital's Bill Ackman - who spent four hours defending his position last week, out in the dark.

"As soon as the stock goes down these guys that were your best friends become your stock's worst enemy," Howard Ward, who mananges the $42.7 billion Gamco Investors Inc and doesn't own Valeant shares. "There is a certain herd mentality and the element that worked on the way up hurts on the way down."

Ackman bought an additional 2 million shares of Valeant in a show of confidence last month, upping the worth of the position to $2.5 billion, despite having lost an estimated $2 billion in the rout. Ackman has also gone from one of the best performers in the hedge fund industry last year, to one of the worst.

In the past three months, Valeant's stock price has been worn down by waves of bad press: US prosecutors began investigating the company for potential price gouging practices mid-October, while short selling firm Citron Research unearthed a questionable relationship between Philidor and Valeant later the same month.

Next month, the US Senate will hold a hearing about price gouging at Valeant and other pharmaceutical companies.

Read the full Bloomberg article here.