Gilead Sciences Inc. (GILD)

This has 2 big drugs; Hepatitis C and HIV. The HIV drug is doing very well and continues to grow. The problem with the Hep C drug is that it cures, so revenue is coming down and the market is implying that the decline in revenue is going to be a lot faster. Secondly, the market is giving them no value for their existing HIV drug which continues to do well. They are also not getting any value from the fact that there are still a lot of people with hepatitis C, and they’ll need to use the drug. Zero value is being given to the pipeline even though they have some good products. A fantastic balance sheet with no debt. They have a lot of cash overseas, and if they are allowed to bring this back, there will be benefits. Trading at 7X earnings. Yield of 2.57%. (Analysts’ price target is $94.89.)

Trading at a pretty low PE multiple, but are experiencing a lot of competition on a few of their key branded drugs. There is not a lot of visibility going forward on what earnings are going to look like. The pharmacy industry seems to be going through a transition. We are seeing consolidation, because that is a way to grow where they can get synergies and cut costs. Not only does this have uncertainty regarding pricing, but are also experiencing competition in their own branded drugs.

It has been in decline for a number of years but looks like it is forming a base. (Analysts’ Target: $95). It looks like it is fairly attractive, but he would sell after it got to $90. If it keeps making lower lows and lower highs then you have to question it.

Had like this before, and is still okay with it. It is really a good company. The reason for the down side was mostly on their hep C drug that didn’t meet expectations. Competition came into the space and sales came down. The overall company is very, very strong. Thinks investors have priced in the downside at this point. Stock looks pretty good here.

(Top Pick Feb 4/16, Down 10.33%) His model price is $140. It is far too cheap right now. He would buy more at $62.

Trading at 6.5X earnings, so it is not expensive. Has a free cash flow yield of 13%. They have 2 main products. HIV which continues to grow and a Hepatitis C franchise. The revenue from the Hep C business is declining. He feels the stock is saying the Hep C is not going to generate any revenue for them, but there is still lots of revenue coming in. Also has some very interesting products in their pipeline which has not been taking into consideration. They have billions of dollars overseas, and can do lots of acquisitions. Dividend yield of 2.62%. (Analysts’ price target is $94.79.)

It has been under pressure over the last year. They have a really good HIV and HEP-C franchise. The pressure is because they cure HEP-C so you take demand out of the market. The cash on their balance sheet should allow them to buy something to create growth in the company. That is why you would hold on to it. He has a small position. You could increase holding if it pulls back further.

Likes this at these prices. Right now, you are paying a very attractive valuation for both the good and the bad. The hep C drug is under a lot of pressure. However, looking at the HIV business they run, that by itself gives you a value of about $70 a share. Pays a reasonable dividend of about 2.5%, and you are getting this at rock bottom valuations.

Still a good holding, but drugs are currently in the doghouse. Stock prices are down 80%-90%. He has a model price of $137.30, from their current price, and a 90% upside. It could go back to $60, and if that’s the case, he would be willing to buy more.

This has had one heck of a correction off its top, about 12 months ago. He has a downside target of $70, which would be a very, very attractive level to buy. Forecasted earnings are sloping off a bit, but the forward PE is only 6.75% times, the upside potential is over 100% and the company has a very nice balance sheet. If he can find this on good technical support with solid value, it’s the kind of stock that can give you quite a bounce.

(Market Call Minute.) This just keeps falling. People keep wanting to buy it because it’s got the earnings off the hep C drug, but what he is seeing is that there is big competition and big price erosion.

He really likes this. One of the larger providers of HIV medication, and one of the major players in the hepatitis C market. Currently trading at about 6X 2017 earnings. The market is very fearful of pressure on drug prices, which is starting to hit this company, and is pricing in way too much of a draconian scenario. They have a tremendous balance sheet. They generate a tremendous amount of cash flow, which they will use eventually to bolster the R&D pipeline. They have been down this road before. Expects them to go out and do a massive acquisition. The stock is really attractive here.

A very unique company. Trading at 6X earnings with a 2.5% dividend yield. They have 2 very important drugs. One is an HIV drug, which is very, very good and is growing nicely. What has caused the stock to be down about 20% on the year, is their Hep C drug. The drug is so good that it is actually curing a lot of people. Although there is still growth on the Hep C side, the market is implying that they are not going to make money. That is wrong as they will continue to make money, but at a much slower rate. He feels the market is giving them zero credit for their pipeline of drugs. Also, feels the market is not giving them credit for the HIV drug which continues to do very, very well. They have lots of cash, so can actually make an acquisition. Dividend yield of 2.51%. (Analysts’ price target is $95.16.)

Had owned this, but got stopped out a while ago. The chart shows it has been coming off since the beginning of last year with a series of lower highs and lower lows. To keep market share in the hepatitis C environment, they were lowering prices, which hurt their margins. Their growth rate has gotten down to flat line over the next few years. (See Top Picks.)

(Top Pick Oct 26/15, Down 29.95%) There is 87% upside potential to his model price. He is not sure why such a disconnect. He would buy more at $56. The normal guy off the street cannot afford the HEP C cure at $10k. Wall Street does not like that it cures the disease so no more drug is purchased by the patient after cure.