Gilead Sciences Inc. (GILD)

A deep value play. Share price has been decimated this year, and has been way overdone. This is a leader in the HIV drug market, but also has a meaningful business in the Hep C business. Hep C is the part of the business that is seeing a lot of pressure, primarily because of competition. Dirt cheap at about 6.2X PE. Currently trading as though the Hep C business didn’t even exist. Dividend yield of 2.54%.

It has a 2.5% dividend yield. It has fallen a lot. The key is that they have two very powerful drugs and $19 Million in cash. The HEP-C drug will have a declining revenue, according to the market, and they also have an HIV drug that is growing. The HEP-C drug will not go away quickly as there are 7000 people in Jails, for example, that need it. The market is giving zero value to their pipeline and they have a good one. They can also make an acquisition. It is a very cheap stock at 6 times earnings.

It has very compelling valuation. Health care names have underperformed in fears of who will take over as president. GILD-Q is trading at 6.5-7 times earnings. Some are saying their HEP-C drugs are being pressured by competitors. He thinks there will be an accretive acquisition in the short term.

Technically the chart is not looking good. It is in a distinct downward trend, and recently broke to a new low. Seasonally this has difficulty from Sept/Oct when the stock has a history of underperforming the market. There are better opportunities elsewhere.

(Market Call Minute) HEP-C is rolling over.

He owns a bit, but isn’t among his top holdings. More recently it has started looking more and more attractive. They got caught in concerns over pricing, and the government started rerating the companies. When they entered the US market with their HEP C drug, they seemed to be very aggressive on pricing. Even at 100, the price to cash flow is very low, but down at 80 it is extraordinary. All management has to do to make the price go up is to declare a dividend. Thinks the regulatory pressures are probably done.

He likes this and is buying it for new clients. This is a waiting game. It had a huge run from 2012, but has really done nothing since 2014. Trading at a great valuation of around 7X, and gives a decent yield of about 2.25%. They are a leader in the hepatitis C and AIDS drug space.

There is a lot of competitive pricing on their leading product, which is causing the stock to come off quite a bit. Trading at a very low PE, but she feels the market is questioning the earnings visibility going forward. Wait to see what materializes next year.

It looks inexpensive. Their return on capital is 62%! It is unbelievable. Their latest quarter was not the strongest. You have a pretty good opportunity here. There is some negative sentiment.

Has not been a fan of this company. He worries that the market is going to anticipate lower earnings on the back of erosion in the pricing of their drug. It is viewed as a one trick pony. They are building up a cash hoard and are very profitable today. Free cash flow yield is 13%, which is very, very good. The question is, are they going to be able to utilize their cash to advance their company. They have done it before. There is a pretty good possibility that at the current price, there is not a ton of downside left. The upside is that they make a pretty bold move, take their offering, and broaden it and move the multiple up.

This stock hasn’t performed that well in the last year over concerns that hepatitis sales are slowing down. This is the world leader in 2 huge areas, HIV and hepatitis. It has a demonstrated track record over the last 20 years of building great franchises. It has been unnecessarily punished because people think hepatitis sales will be down. The HIV is worth $70. Dividend yield of 2.41%.

GILD-Q vs. DIS-N. Gild-Q: 7-8 times earnings. HEB-C drug is over 2/3rds of the revenue. The revenue is rolling over a little bit. They need to either get a surprise in the pipeline or acquire somebody. The dividend is safe but won’t grow much.

There has been a lot of concern about some of the competition coming from Merck (MRK-N) hep C medication. Right now, Gilead is really the market leader for hep C and HIV treatment. They had to lower some of the pricing and make the treatment a little shorter, which is good for the patient. However, they have still been able to maintain about 80% of the market share. This is a great value in the biotechnology sector. Dividend yield of 2.41%.

(Top Pick Sep 19/15, Down 27.04%) $170 Model price. It is at 7 times PE. Wall street does not like them because they cure someone rather than sell them drugs for life. Keep an eye on it. He thinks it will do well.

(Market Call Minute) Revenues for the HEP-C drugs are in decline.