ABBV

Biotechs Bruised

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Biotech stocks, in general, are more volatile than the average stock. Small-cap stocks (VB), in general, are more volatile than the average stock. Small-cap biotech stocks then may very well be the most volatile of any grouping of stocks. Unfortunately, the recent direction of volatility across equities in the biotech arena has been of the sharp, downward variety and has been most unwelcome, amid a broader market decline. Mr. Market is having a temper tantrum, but all the while, he may have every right to be upset. The iShares Nasdaq Biotechnology ETF (IBB) is perhaps the best proxy for the market’s appetite to bet on the development of long-term drugs and therapies. The industry ETF, which sports a trailing price-to-earnings … Read more

5 US-Centric Undervalued Stocks with Fantastic Economics

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“In business, I look for economic castles protected by unbreachable moats.” – Warren Buffett << Read more about Economic Castles Image Source: Rob Faulkner The see-sawing action in the US markets has not let up, with the latest wave of the upward variety. The S&P 500 (SPY), however, remains nearly 8% off its all-time highs, as global markets continue to ebb and flow with news of negative economic data followed by the prospects of an ever-easing monetary environment and so on. Several major economies across continents are in technical recession (Brazil, Canada, etc), while others continue to face a slowing pace of economic expansion, not the least of which are Australia (EWA) and China (FXI). The global economic outlook is … Read more

Quick Take: Gilead Blows By 2Q Estimates; Investors Getting Drug Pipeline for Free

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Gilead (GILD) has delivered. The company’s second-quarter 2015 results showed product sales of $8.1 billion and non-GAAP earnings per share of $3.15, up 27% and 33%, respectively, from the same period a year ago. For those that don’t know Gilead, the company’s hepatitis C powerhouse drug, Harvoni (ledipasvir 90 mg/sofosbuvir 400 mg), led to the quarterly outperformance. We continue to believe the market is 1) underestimating the sustainability of Harvoni (both the number of potential patients to be treated globally and pricing resiliency) as well as its drug development pipeline, which we believe investors are getting for free. Gilead is a holding in the portfolio of the Best Ideas Newsletter, and we don’t expect to make any changes following the … Read more

Target-CVS Agreement: What It Really Means

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Image Source: Mike Mozart Target (TGT) and CVS Health (CVS) announced an agreement June 15 in which CVS would acquire, rebrand, and operate Target’s pharmacies and clinics for the price of approximately $1.9 billion. After the deal closes, CVS will operate 1,660 of Target’s pharmacies in its stores under the CVS/pharmacy brand name. The nearly 80 Target clinics involved in the deal will be rebranded as MinuteClinic, and CVS plans to open up to 20 new clinics in Target stores, part of the CVS/minuteclinic goal to operate 1,500 clinics by 2017. Target and CVS also plan to open five to ten small, flexible store formats that will be branded TargetExpress and include a CVS/pharmacy. After Target’s recent Canada debacle, we … Read more

The Tax Man Cometh Anyway?

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Image Description/Source: Berlin Wall, 1963; Roger We ran a video in late January about the concerns we had with Yahoo’s (YHOO) fair value uncertainty, and it turns out they weren’t unfounded (see video). One of our biggest issues surrounding the company was the potential tax ramifications of the spinoff of Alibaba shares (BABA) and whether ultimately the tax bill would land on shareholders’ laps. It turns out that it just might. Bloomberg reported May 19 that the IRS is considering a rule change that would “affect IRS rules for spinoffs by creating new US guidelines that might require a minimum size for active businesses inside the spun-off company.” As it stands right now, Yahoo’s spin-off is just an investment entity with no … Read more

The Savvy Strategy of Gilead’s Management

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Gilead investors’ only thing to fear is fear itself? I never thought I would refer to the first inauguration speech of Great Depression and World War II President Franklin Delano Roosevelt in explaining the situation with Gilead Sciences (GILD), but I just did. The psychology of the markets is perhaps the most difficult to assess, and I can almost feel portfolio managers behind their multi-screen terminals just scratching their heads, saying “Am I missing something?” To them, I say “No, you’re not.” Gilead’s shares are trading at bargain-basement levels, and its fourth-quarter results were stellar. Yet, to their dismay, they will wake up tomorrow to find Gilead’s shares trading lower than the day prior. It is almost as though the … Read more

4 Opportunistic Stocks To Consider Buying in 2015

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The Valuentum Buying Index (VBI) is a philosophy that considers the valuation of a company and the likelihood that a company’s stock will converge to a cash-flow derived fair value estimate. The VBI accepts the view that value is based on the sum of a company’s future expected discounted free cash flows and the excess cash on its balance sheet, while acknowledging that market participants must eventually agree with a firm’s underpricing (and buy the stock) in order to drive the stock’s price to fair value. An underpriced stock with no buying support is not poised to generate good returns, nor is an overpriced stock with good momentum as it will eventually succumb to panic selling once euphoria fades. Stocks … Read more

HCV Competition Not New “News” for Gilead

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Let’s set one thing straight. On a fundamental basis, biotech firm Gilead Sciences (GILD) is performing quite well, contrary to what its recent stock price move might suggest. Prescriptions for the firm’s Harvoni and Sovaldi hepatitis-C drugs continue to track slightly ahead of projections, and we would expect a slightly stronger-than-forecast fourth-quarter report as a result. In coming periods, we look forward to positive management commentary that speaks to the strength and sustainability of the firm’s hepatitis-C franchise (about half of Gilead’s sales). Any commentary, in light of the recent uncertainty and growing competition in the hepatitis C market, will be reassuring for investors that have been anxiously pursuing tax-loss selling and profit-taking in Gilead’s shares the past few weeks. … Read more

Gilead Sciences: The Going Rate for a Stock Analyst These Days?

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Image Source: September 2014 Best Ideas Newsletter, page 9 If there is one thing that I would encourage all of you to do when looking at your holdings in your portfolio it would be to look at their long-term charts. There is nothing that provides greater perspective than looking at historical performance and assessing when price moves may just be reasonable profit-taking (and/or risk-mitigation) versus something more serious. You don’t have to be a highly-trained technician to know that a 5% pullback on a stock that has more than quintupled is a meaningless move. Case in point: Gilead Sciences (GILD). I want you to check your stocks every day, if you feel the need, but you shouldn’t make assessments on … Read more

Medtronic Surpasses $70 Per Share

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Interested in what the path of Medtronic’s (MDT) equity price has been since it was added to the Dividend Growth portfolio? Incredible, no? It’s so important that we point to our favorite ideas such that you can become familiar with our track record. We don’t get everything correct, but our hit rate on new ideas has been near perfect. Unlike other research houses, we take to heart Warren Buffett’s two rules:  Rule No. 1: “Never lose money. Rule No. 2: Never forget rule No. 1.” This is why it may be a few weeks or a few months between each email transaction alert we send out to members. We want to deliver only the best. If we were interested in … Read more