Gilead Sciences Inc. (GILD)

(A Top Pick April 9/14. Up 57.42%.) There is some competition from AbbVie (ABBV-N), but when you look at their market share of the hepatitis C vaccine market, they own about 85%-90% and are going to retain that. Their drugs are much easier to take, and a much better format in terms of how they are prescribed, etc. The stock is trading at 10X forward PE with probably a 15% growth rate.

The media focuses on negative stories, but these big companies can shift assets and wring out some costs to make up for any sort of pricing differential. His model price is $168, a 54% upside.

Their big drug right now is for hepatitis C. They were the first company to really get a drug to cure it. Enormously expensive. There are now a couple of competitors in that space. The question is, how long can they keep the price up and how long can it be sustained. This is not a one trick pony as they have a lot of drugs in their pipeline. Feels the smaller pharmaceutical companies are a better deal at this point.

This had a huge beat on its earnings and you don’t often see them that big. Based on their 2 hepatitis C drugs there have been lots of press. Trading at only 10X earnings. Still have a strong pipeline in HIV. Yield of 1.63%.

If they deliver the earnings expectations they should do well. The question is will insurance companies continue to absorb the costs they are paying out. He would prefer to diversify, perhaps buying an index ETF.

(A Top Pick May 1/14. Up 32.55%.) He really likes the biotech sector. Breadth has been expanding very nicely. The stock has consolidated over the last 4 months, and is breaking out today to the upside. Feels there are some potential M&A opportunities they may have. Has just bought more shares today.

(A Top Pick April 9/14. Up 43.18%.) AbbVie (ABBV-N), a competitor in hepatitis C, will probably grab about 20% of that market share. Their drugs are probably not as effective so will probably not be recommended as much. Still trading at 10X forward PE with probably a 15% long-term growth rate. PEG ratio is well below 1.0.

A world leader in HIV and hepatitis. Trades at almost a 10% free cash flow yield and just started paying a dividend this year. Thinks it has a fair bit of upside. This is a really good sector that generates a lot of free cash flow. Q1 sales could exceed expectations. (See Top Picks.)

(A Top Pick Feb 13/14. Up 25.41%.) They have another drug which is a little bit cheaper. He still likes this. Very cheap trading at 11X forward price earnings. Still trading with a 25% estimated long-term EPS growth rate. It puts it at a PEG ratio below .5.

They are getting competition now so they have to charge less for their products. He has been very skittish and cautious on this company. What you saw on the surface was this fast growing low multiple company, which looked almost too good to be true. They charge an enormous amount of money for their hepatitis C drug, but they are now getting a lot of competition. Insurers are now negotiating with their competition.

(A Top Pick Feb 13/14. Up 27.33%.) Had a little bit of volatility in the last few months, but still likes the stock quite a bit. You are paying 11X earnings for stock that is probably going to grow at 25% earnings per share growth. PEG ratio is below 5, which is pretty rare in the S&P 500.

Has a major, very expensive drug for hepatitis C and is in competition with AbbVie (ABBV-N). They are getting dropped by pharmacy benefits managers which has hurt the stock price. Even though it looks cheap on a multiple basis this one is too hard for him to figure out.

Phenomenal business. The wonder is their cure for Hepatitis. From a cash flow basis it is hard to predict. Made an announcement today that they will be the exclusive supplier of the drug to CVS-N.

In almost all of these companies, they are very, very highly valued, at 8X Book and more. Because of that, they had better be profitable. This one is. The FMV would give him an upside of pretty close to 50% presently. There is good technical support at $90-$92. There is also a nice momentum on the earnings.

A big pharmacy benefits manager in the US, Express Scripts (ESRX-Q) decided not to provide coverage for this company’s Hep C drug. Have gone to a rival drug provided by AbbVie (ABBV-N), and the stock fell by over 15% today. Stock had a nice run from April up to the end of November, but the chart shows an almost classic head and shoulders pattern now, implying that the price of the stock could go lower. This is a biotech sector stock that is not acting well, unlike others which are acting much better.