Spicing Things Up with GILD

[Robandcindy2]

When I'm on layovers with nothing to do around dinner time I usually have a burger in Cra-Merica....love him or hate him he can be entertaining and somewhat educational. Now this thread isn't about Jim but about his love of the 4 Horsemen of Biotech (REGN, CELG, BIIB, GILD).

So his reporting had me thinking about adding a little spice to our portfolio. I mean, "who doesn't like hitting a home run?" (Yeah, mixed metaphor-sorry).

As I started to contemplate buying some aggressive growth companies I found my inner voice whispering louder and louder "Rob...Rob!....What are you doing Rob??!!" Quite eerily Chuck Carnevale over at SA (and FastGraphs) published this piece Are Growth Stocks Appropriate for Retirement Portfolios.

OK, so Chuck says "maybe" 10% in growth companies. So far so good. But what exactly is a Growth Company? I'll spare you my research but in a nutshell it is everything we don't own on this site. High EPS growth, usually high PE, PB, and low to zero dividends.

I did find this concise review at Zachs that I think we all can learn from: Growth Stocks versus Value Stocks. So remembering a cooking lesson from my Grandmother, "You can put spices in but you can't take them out..." I decided to throttle back and rethink this.

As Jim says, "The bottom line is this," a little kick is OK as long as all the numbers let you sleep well at night. Isn't Rule #1 "Don't Lose Money"?

GILD is on a tear:

   

36% forecast 5 year estimated total return.

Then there is this review over at SA: Gilead's Massive Undervaluation.

Wait! What? (Always cracks me up when my kids respond to me that way). So GILD has massive growth in it's future AND it is massively undervalued? Growth AND Value? What's not to like? (OK, a 3% yield would be a grand slam.)

Will this be our walk off game winner? Certainly not. I'm am not changing tactics now with a portfolio growing at 10% with a 3.38% yield and 2-7 years until I turn in my wings. But if GILD has it's A-game, it's going into our line-up.

Time will tell....

[EricL]

I've been tempted by GILD as well. Have some money about ready for a first investment in our newborn son's education savings account. I've been debating whether to go the safe and steady DGI route or to take a chance with a few high growth stocks like GILD and hope for a home run over the next 18 years.

I would have enough for two shares here.

Thoughts?

[Robandcindy2]

(07-31-2014, 09:07 PM)EricL Wrote: I've been tempted by GILD as well. Have some money about ready for a first investment in our newborn son's education savings account. I've been debating whether to go the safe and steady DGI route or to take a chance with a few high growth stocks like GILD and hope for a home run over the next 18 years.

I would have enough for two shares here.

Thoughts?

My first thought is always "safe and steady DGI". That said, the first sound bite from my parents when we started investing for our kids is that they have time on their side. Not sure where others are on this but the market is quite high and the next correction would be a better time. However, with time on their side will they care 20 years from now if you bought at $91.55(today) or $88 say a month from now?

Or buy it all for them. Here is a comparison of VTI-VIG-VYM:

   

[earthtodan]

Chuck Carnevale has written about investing for growth before. http://seekingalpha.com/article/1775612-...for-growth

I don't think it has to be considered a radical departure from the DGI strategy. Growth simply means the company has better things to do with cash than pay it out, because they're still reinvesting internally. Most of my stocks are dividend paying but I have a few that aren't, or aren't yet, and I consider them all to be under a coherent total return umbrella.

I've never looked at GILD before, but it looks like a great deal given the earnings growth estimates. I'll add it to my watch list.