Gilead Sciences (GILD) is under severe pressure and many investors don’t think it’ll ever come back which is almost always an excellent contrarian buying signal, explains Keith Fitz-Gerald — principal of the Fitz-Gerald Group and editor of One Bar Ahead, a digital magazine exclusively for individual investors and traders.
The company popped nearly a year ago last March when Covid-19 broke and, in doing so, set a new 52-week high of $85.97 based on investor expectations associated with Remdesivir. Since then, Gilead’s been scrapping along at bottom of the barrel prices.
I think the stock could easily return to $85 a share within the next 12-24 months and top $100+ for a double in 36 months. Like so many stocks I am evaluating at the moment, this company has a lot going for it that the markets do not recognize immediately but will.
Gilead is what I call a “virus+” investment. Consider:
• Gilead has a massive oncology portfolio including Yescarta and Tecartus which may produce $2+ billion in sales with additional treatments and approvals on tap in 2021. That’s in addition to what could be a $10 billion oncology portfolio a decade from now if company data proves out like I think it will.
• The company’s HIV treatment is the industry’s leading choice and, despite a Federal HHS lawsuit, a significant revenue driver with sales of $20+ billion.
• Gilead spent $27 billion acquiring five significant choices in 2020 including Forty Seven, Pionyr Immunotherapeutics, Tizona Therapeutics, Immunomedics and Myr GmbH that should provide a powerful launching point for entirely new drug channels.
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• All of this comes at a time when Gilead’s scientists are learning a lot from the Covid-19 fight that can potentially be applied to the company’s entire portfolio.
• Yield is a healthy 4.79% as of this writing and an appealing choice for income starved investors at a time when rates will remain low for the foreseeable future.
• The PEG ratio is a very appealing 0.42 which suggests extraordinary value for expected growth.
Action to Take: Gilead could fall further if investors stay focused on Covid-19 vaccines but that’s a tremendous opening in the scheme of things to my way of thinking. Cancer isn’t going away any time soon. Anything under $60 is a serious bargain in the offering with the right perspective and time frame.
Options-savvy investors seeking an even more aggressive opening could consider selling cash secured puts as an alternative in the $50 - $55 range. (Disclosures: Keith owns and trades shares of Gilead as do members of his family.)
