Gilead Sciences Inc. (GILD)

(A Top Pick January 16/17. Up 14.3%) A pharmaceutical company. It collapsed at that time and that is why they bought it trading at 8 times earnings. It has a good dividend yield. It has two drugs. One of the drugs is curing everybody and revenue coming from there was falling and the market people overemphasize that. They have a lot of cash on hand. They think it could buy more things like a recent very good acquisition of a company with a new technique to fight cancer.

They had a great pop. He stepped out of Biotech and healthcare as a sector went to a neutral. He is more cautious on this as the entry gets higher.

(A Top Pick Dec 30/16. Up 3%.) A biotech company. Had 2 big products, a hep C drug and an HIV drug. The HIV drugs are doing quite well. The hep C drug is so good it cured people faster than expected. The stock ran up on the hep C drug, and is now declining. They have a lot of cash and acquired a pharmaceuticals company, which is a good acquisition for them. Good dividend yield and they should benefit from tax reform. He still likes this.

Has always shied away from this. They had a very successful ramp with their HEP C drug portfolio, a peak, followed by a fairly rapid decline. The decline came on a couple of issues. It was a total cure so there wasn't a recurring customer. Also, a number of other pharmacies came out with products that competed effectively, so there was price competition. The HEP C portfolio is falling about 40% year-over-year.

Has a very strong balance sheet, and is looking for future growth. They’re not able to satisfy that organically, so are going out to make acquisitions. They announced one a few months ago, and expects they are going to continue to look. However, they are not cheap, so Gilead may have to pay a very full price. The company is well-managed and owns fine assets, but she would wait.

He bought it at this level 3 or 4 year ago. The growth has stopped. The HEP C drugs caused it to run as well but they cured people so it was not going to lend itself to a lot of recurring revenue. The worst is behind them. They have other drugs in HIV and Oncology that could get the growth back up.

Technically, this has been having a difficult time in the last little while. It has a period of seasonal strength from about mid-December to around April of each year. We are not in the period of seasonal strength yet. It is forming a base pattern. Technically, if it gets above $78 level, that would be a confirmation of the bottoming pattern and that the security is going into its period of seasonal strength.

This has recently gone higher, to about $80, so there will be people wanting to sell. Avoid. You may have to wait a couple of years before the oversupply can be digested. Dividend yield of 2.86%.

They lost a lot with the HPV vaccine. They have so much cash on their balance sheet that they can pretty much buy anything they want. She likes it and owns it. They have opportunities through acquisitions.

(A Top Pick Nov 29/16. Up 1%.) Part of the issue with them was that they had a couple of drugs, one for hepatitis C that was so good that it was curing people. The market was worried that revenues were going to fall off because of that. They had lots of cash, so recently made an acquisition in the cancer area. They still have lots of cash. Thinks the AIDS drug will do well for them. They still have things in their pipeline that people are giving zero credit for.

Looking at a long-term chart, you can see the bleed, especially over a longer than a 1-year timeframe. They’ve had a very mixed quarterly performance. This is ultimately going to fall into that trap where you are facing a wall of people who have been buying it all the way down, and you are going to be meeting those people who are selling on the way up. The kind of situation he would step out of if he were in it.

This is among biotech stocks which historically, have done very well from April right through until the end of September. It happened again this year, although it didn’t happen last year. Look for an opportunity to take profits on strength.

(A Top Pick Oct 27/16. Up 13%.) Felt that a lot of the pharmaceutical companies had been beaten up and there would be a big uptick. The stock actually went down for quite a while. They did very, very well because of their HIV and hepatitis C drug. The problem with the hepatitis C drug is that they were curing people too quickly. Just made a recent acquisition on the cancer side which pushed the stock up a great deal. He still likes this.

They recently made an acquisition. If Kyte was so great why did they sell out? GILD has the ability to take them to market. The knock on the stock has been this cash cow and not reinvesting in their pipeline. They are not into oncology. Novartis got approval on a similar drug recently and that drove the stock higher. You are okay to hold this here. Let’s get through this November date.

About 50% of its franchises are based in hepatitis C. You really have to be careful, because this franchise is slowing. They have 2 prospective years of negative earnings growth, which is a huge headwind. Value this on its long-term cash flows. There are 2 things to consider. 1.) How sustainable are they. If that continues, then you have a leg to stand on. 2.) If you have falling rates, that is good for valuation. The problem is, we are probably going to have flat to rising rates, and Pharma M&A is a bit of a dice roll. He doesn’t buy into the story, and would prefer the Spdr S&P Biotech ETF (XBI-N). You could be a little more conservative using the iShares D J Medical Devices ETF (IHI-N).