GILD

[rayray]

As I look at 2016 and consider companies to invest my dollars for the long term this company is becoming harder and harder to ignore.

[Dividendsrule]

I'm a fan

[benjamen]

Why are you a fan? I am actually unfamiliar with this company. The lack of information spiked my curiosity...

Sector: Healthcare
Industry: Biotech
Cash cow drugs for HIV and Hep C
P/E: 9.3
Yield: 1.7%
Payout ratio: 14.3%
Dividend history: began paying dividends in June 2015
Beta: 0.92
D/E: 1.3 --- However, they are sitting on a big pile of cash
5 Year EPS growth: 39.1%

[Dividend Watcher]

I hold GILD and bought some more when it dipped below $100 a couple weeks ago. It did it again today although I'm full up now.

My thesis:

GILD is taking a lot of heat for their pricing of Solvadi/Harvoni -- in the thousands in the developed world but pennies on the dollar for 3rd world countries. I'm not so sure I like the practice but my personal beliefs shouldn't affect my investing decisions. They're doing just what they're supposed to do for shareholders. If the guv'mnt's going to cry about it, then they should remove the restrictions on Medicare/Medicaid from negotiating drug prices.

I'm not so sure GILD's in-house research department is as productive as it should be but they are good at buying companies with promising products at mid- to end-stage development and shepherding the product through clinical trials and approval. They then market the "heck" out of them. I don't think they're as conservative as JNJ when looking at buyouts but they don't grossly overpay which helps the bottom line.

GILD also has the top drug lineup for HIV, another killer they've managed to "contain", along with some promising oncology meds in the pipeline.

I don't know when Mr. Market will finally price GILD along with the rest of the biotechs and for now don't care. The cash keeps piling up giving them ammunition to boost the dividend   and cash on hand for when they find the next company with a promising product they think will fit with their strategy.

I think one of two things will happen. Either their "house of cards" will fall apart and GILD will sink into the sunset OR the P/E will get so low (or the cash hoard so large or both) that the market will HAVE to react to its cheapness. Whoever heard of a company that is pulling in that much cash with products that are so vital to saving lives falling apart? Obviously, I'm betting on the latter and see slim chances for the former.

[Rasec]

Should we start getting nervous about Gild?

I get they still make a lot of money, but how likely is that to change in the next few months?

[EricL]

(01-29-2016, 12:13 PM)Rasec Wrote: Should we start getting nervous about Gild?

I get they still make a lot of money, but how likely is that to change in the next few months?

I don't think there is any question that they can make a lot of money, and I think the grandstanding from the politicians regarding drug pricing will be more bark than bite, just as it always has been. Remember we are in an election year, politicians have to look tough for their constituents.

GILD and really all of the biotech sector has been hit hard over the last 6 months. GILD now trades with a roughly $120B market cap while it has $15.7B in cash and is producing $14B+ in annual cash flows. Take out the cash and it is trading for less than 6 times expected 2015 earnings.

The market is pricing in a huge cut for future earnings, but even completely removing all HCV income from Harvoni and Sovaldi and the company would still be fairly valued off of all of their other sales. I'm hoping for a ~20% dividend boost along with Tuesday's earnings release, and am expecting EPS to once again beat estimates with guidance above 2016 estimates as well. No idea if any of that will finally turn the sentiment, but I won't be selling my shares anytime soon and am happy to be reinvesting my dividends at a discount.

[Rasec]

So what you are saying is, "take this sale and double down on it, as the only way is up!"


Good, because I bought a bit more earlier today to average down and I needed that sentiment! Seeing the market on the green today helped with the decision.

[EricL]

(01-29-2016, 04:55 PM)Rasec Wrote: So what you are saying is, "take this sale and double down on it, as the only way is up!"


Good, because I bought a bit more earlier today to average down and I needed that sentiment! Seeing the market on the green today helped with the decision.

To be honest I thought the only way was up at $100 too, so you may not want to listen to me too much! =)

[DRILLINDK]

I've been stalking this for a while...and it's getting VERY appealing.

[Dividend Watcher]

(01-29-2016, 04:55 PM)Rasec Wrote: So what you are saying is, "take this sale and double down on it, as the only way is up!"

Good, because I bought a bit more earlier today to average down and I needed that sentiment! Seeing the market on the green today helped with the decision.

No, Rasec. The only way is NOT up as was evidenced today. BUT ...

The trailing 12 months GAAP reported earnings are $11.74. At today's close of $83, that gives us a P/E of 7.1. So if you're expecting earnings to drop to 4Q14 levels of $2.43, you're still getting it at the same P/E. That's quite a drop in earnings. The street consensus is expecting $2.98 giving a TTM P/E of 6.8.

In the 3Q15 earnings release, this was there:

"As of September 30, 2015, Gilead had $25.1 billion of cash, cash equivalents and marketable securities compared to $14.7 billion as of June 30, 2015. This increase was primarily due to the issuance of senior unsecured notes in September 2015 for a total aggregate principal amount of $10.0 billion. During the third quarter of 2015, Gilead generated $4.1 billion in operating cash flow, utilized $3.1 billion to repurchase 28 million shares and paid a cash dividend of $627 million, or $0.43 per share."

That was just in the quarter. The dividend was only 15% of cash flow!

They also list Cash & Equivalents of $25,411B vs. Long-Term Liabilities of $23.329B on the Balance Sheet. In other words, they could pay off all their long-term liabilities and still have money left over. How many companies can show that?

I have little concern about GILD being a long-term cash generator. As I said before, eventually the P/E will be so low and the cash (and free cash flow) will be so high either Mr. Market is going to react or someone will attempt to buy them. In the meantime, the price could still be under pressure for a lot a reasons; some inexplicable to me.


This is where patience is a virtue. In the meantime, I'm seriously thinking of cancelling the few low-ball GTC orders I have left and picking up a few more shares despite already being at a full position with an average cost of $103.

ETA:

Probably some of what's concerning some people is GILD's investment in Galapogos. See here. GILD is known as an antiviral drug company, not RA and associated autoimmune diseases. Since filgotinib is still in trials and RA, along with its kin, is so hard to treat, there's no guarantee of success. Even Abbvie's Humira isn't effective for the majority of sufferers. Read this for a feel of the difficulty in treating this awful disease.

[DividendGarden]

Tim McAleenan just wrote about GILD. Low PE, buying back tons of stock. I'm interested in GILD, now.

http://theconservativeincomeinvestor.com...reholders/