Gilead Sciences Inc. (GILD)

(A Top Pick April 21/16. Down 33.5%.) World’s largest provider of HIV medication. In the last 3-4 years, it became the market leader in providing hepatitis C medication, which actually cures the patient. It has a 13% free cash flow yield and trades at about 8X earnings with over a 3% dividend that will increase every year for the next several years. This is worth in the $90’s.

The company invented a drug that didn’t just help the patients, it cured the disease within 12 months. It would have been better business for them if they had invented a drug that merely made the disease better. A very profitable company, but he wouldn’t want to be an owner because revenues are going to be going down.

This has been one of his worst performers. His cost base is around $80. Trading at 8X this year’s earnings. He is going to give this one more quarter. We need to see their pipeline start to fill out and we need to see M&A coming to progression.

A biotech stock that screens very well. On a valuation and cash basis, it looks great. The problem is, there are really only 2 products that account for the bulk of their revenue, and they are coming on patent cliffs. This gives increasing competition, so there are dramatic declines in revenue generated by these drug franchises. The biotech sector has gone from being a darling in mid-2014 into a discount position. She hasn’t played the biotech space, just because she sees it as a binomial event.

This has a drug that actually cures people so that they don’t need the drug anymore, so it’s market is getting smaller by the day. They are sitting on a ton of cash, which at some point is going to be used to buy something. If you are prepared to wait, this is a company that is going to need to do something. A higher risk, so he wouldn’t have it in his portfolios.

A big winner for him for about 5-6 years, but when Hillary Clinton did her famous tweet, he sold his holdings. Their hepatitis C drug basically eradicated the disease. They have an HIV drug regimen that is turning out great results, but is expensive. It could be a great long term franchise for them. This looks really interesting, and would get back into the name on a break out. Trading at only 8X forward earnings.

One of the most controversial names in healthcare in the US. They have cured hepatitis C. Insurance companies in the US will only pay for the treatment if you have proof that you have hepatitis C. There is a lot of untreated hepatitis C still out there. Amgen as a competitive product that is almost as good. This is only trading at 6 or 7 times earnings and is probably pretty safe here. He would average into this.

Feels the market is discounting way too much on their hepatitis C drug. Because it is curing everybody, the growth rate in that drug keeps falling. He likes it at this range and it pays a good dividend. Trading at 7X earnings, incredibly cheap. Has a huge cash flow yield. They have a good balance sheet with lots of cash. Their HIV drug continues to do very well for them. Feels the market is giving zero value to their drug pipeline, where they have some very interesting products.

You hear about them being cash flow generators, but you have to remember cash flow is discounted. If interest rates are going up then the value of that cash flow is coming down, in today’s dollars. It does not fit into his process. You will be fighting interest rates for a very long time. If you get a basket of biotechs, it might work a little better.

Got out of this some time ago, given what was happening with their guidance with some of their drugs. They guided their 2017 guidance lower, even though they met 2016 expectations. He doesn’t see this recovering in the very near future. Their growth rate is flat for the next few years.

Chart shows this has a declining triangle, and he would stay away. We don’t know where this will end. It’s in a period of prolonged weakness.

Something he was very excited about owning for about 5-6 years, and it did very, very well. Using his stop-loss strategies, he was able to pull out of the name when Hillary Clinton started talking about drug costs. Believes this has an absolutely, ridiculous, low PE ratio. Their hepatitis C drug looks like it is their one trick pony, which is causing it to pull back. This whole space is getting pretty long in the tooth of a downward trend in the cycle. Thinks the selloff is overdone. The kind of thing where we have to start looking for some value. Attractive at this level.

This is the company that found the cure for hepatitis C. It has been a very challenging stock to own, and very much a value trap for the past couple of years. They are seeing price pressures and competition from many competitors over the next year on hepatitis C. They have cut their guidance sufficiently that they can meet it. A great balance sheet and are buying back tons of stock. An OK dividend. Thinks they have some hidden assets in their Nash portfolio and expects to see some results towards the end of the year. He uses covered call strategies to help generate some extra income.

They brought guidance down going forward. They have a key HEP-C drug which is getting competition. They have to figure out a way to grow their pipeline and then their revenue and earnings. She would not be buying it for Pharma exposure. See her top picks and she also likes ABT-N.

7 times earnings. It fell on a recent earnings disappointment. The HIV drug is continuing to do well and the HEP-C drug is declining because they are curing everyone. He wants to see them do an acquisition that will grow their drug business. Some of the drugs in their pipeline look promising and he needs to see them coming to fruition. They are buying back their shares and will hopefully increase their dividend. (Analysts’ target: $82.00).