Gilead Sciences Inc. (GILD)

An interesting company. In the biotech area, this gets a lot of press. They have a Hep C drug that is a blockbuster, and is benefiting the company by leaps and bounds. A lot of people are crowding into this trade because of the quickly growing situation. Digging a little deeper, you find the price of their Hep C drug is exorbitant, $1000 a day. Abbvie (ABBV-N) are in the late stage development of a Hep C drug that seems to have the same efficacy, and will be a heck of a lot cheaper. You have to be aware of the risks.

Like all high stocks went through a huge base building since 2002 and finally broke out. It is staying above its 40 day moving average. Stay with it.

A good company. Trading at about 13X forward earnings. Has been a little controversial. Has a hepatitis C drug, which costs about $84,000 to take, and has a lot of politicians up in arms. Very innovative with some good drugs in the pipeline. This is one you could own for the longer haul. It will be volatile. For the next number of years there is a pretty good indication of earnings growth, but a big chunk of its profits are driven by one drug. If they start running into problems with regards to politics with the pricing, it could prove to be problematic.

They are looking for a doubling or more over a short period of time. He owns United Therapeutics (UTHR)

A very, very successful biotech company. Although that sector is out of favour now, this company is kind of a phenomena because it has the cure for hepatitis C, which is huge. Price-to-book is at 9X, and forward earnings is in the high 20s, so it is expensive and the market tends not to pay much for expensive stocks.

This is a growth name, not a yield generating company. He likes this because it has a growth rate that is roughly twice what you see in the ethical pharmaceutical companies, but is trading at a multiple that is about the same. This got hit when the biotech ETF’s sold off. There are near-term catalysts over the next year that could be quite positive for the stock.

Share buyback is a positive. But it could not take out its high for the previous year. He looks for a dip to the 200 day average or below. If support reestablishes at $70 then you could get back in. There will be tremendous volatility for the next year or two in the Pharma space.

Trading at only 11X next years earnings because they have had a real earnings boost from their most recently released hepatitis C drug. Sold off with all the other biotech’s earlier in the year, which provided a great entry point. Have a tremendous pipeline, and some very, very potentially meaningful drugs.

Is going to participate in a big conference in Chicago at the end of the summer where they announce new results with cancer drugs. Stick with it if you own it. Prefers IBB-N

Has a series of great products, lots of catalysts over the next 6 months and they are growing at twice the rate of the rest of the group. It is a great entry point because the sector suffered selling indiscriminately. It has a low multiple.

Biotech has 2 periods of seasonal strength. One is predominately during the summer from August through until October, but there is also a very minor push during the months of April and May which we are seeing now. Had a huge selloff during its seasonal weakness of February to April and had become deeply oversold. We are now into a minor period of seasonal strength, but he would look into buying this in August.

A Top Pick last time. Has been beaten up. Has a blockbuster drug where earnings will explode. 18 times earnings, 25% earnings growth.

One of the world’s largest bio pharmaceutical companies. Primary area is in HIV AIDS, but they just had their hepatitis C drug approved in December. This will mean tons of revenue in the billions and earnings growth. Expects a 30% growth rate. Trading at 22X earnings, which is a pretty compelling valuation.

One of the larger biotech companies. Biotech has been outperforming pharma. You can also look at BBH for exposure to the sector. Just pulled back into the moving averages.

Likes their technology and products. When he models out the prospects for their new HEP C drug the numbers don’t work. Thinks the new product is already built in.