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In this article, three solid, large-cap biotechnology stocks with strong fundamentals are presented, including Gilead Sciences, Inc. (NASDAQ:GILD), Amgen Inc. (NASDAQ:AMGN), and Celgene Corporation (NASDAQ:CELG). All three stocks have a strong ROE and a low beta and are great long-term holdings.

Gilead Sciences, Inc.

Gilead Sciences, Inc., with a market cap of $63.78B, is a research-based biopharmaceutical company, which develops and markets therapies to treat life-threatening infectious diseases with the core portfolio focused on HIV, liver diseases, such as hepatitis B and C, and cardiovascular/metabolic and respiratory conditions. GILD was down 0.85% and closed at $42.09 on February 25, 2013. GILD had been trading in the range of $22.33-$43.35 in the past 52 weeks. GILD has a very low beta of 0.46.

On February 19, 2013, Credit Suisse upgraded GILD from Neutral to Outperform. Analysts have a mean target of $46.96 and a median target price of $46.00 for GILD. Analysts are expecting an EPS of $0.50 with revenue of $2.57B for the current quarter ending in March, 2013. For 2013, analysts are predicting an EPS of $2.02 with revenue of $10.59B, which is 9.20% higher than 2012.

There are a few positive factors for GILD:

  • Higher revenue growth (3-year average) of 16.3 (vs. the industry average of 13.6)
  • Higher operating margin and net margin of 40.5% and 26.8% (vs. the averages of 25.9% and 13.7%)
  • Stronger ROE of 33.9 (vs. the average of 13.5)
  • Lower P/E of 26.4 (vs. the industry average of 43.3)
  • Lower Forward P/E of 13.3 (vs. the S&P 500's average of 14.0)

Amgen Inc.

Amgen Inc., with a market cap of $67.70B, is an independent biotechnology medicines company. Amgen discovers, develops, manufactures and markets medicines for grievous illnesses, focusing solely on human therapeutics and concentrates on medicines based on cellular and molecular biology. AMGN was up 3.14% and closed at $89.55 on February 25, 2013. AMGN had been trading in the range of $65.37-$91.25 in the past 52 weeks. AMGN has a very low beta of 0.39.

Despite the recent downgrade by William Blair from Outperform to Market Perform, analysts have an overall neutral rating on AMGN. According to Yahoo Finance, analysts have a mean target price of $94.92 and a median target price of $95.00 for AMGN. Analysts, on average, are expecting an EPS of $1.82 with revenue of $4.36B for the current quarter ending in March, 2013. For 2013, analysts are predicting an EPS of $7.17 with revenue of $17.97B, which is 4.10% higher than 2012.

There are a few positive factors for AMGN:

  • Higher operating margin and net margin of 33.6% and 26.7% (vs. the industry averages of 25.9% and 13.7%)
  • Stronger ROE of 20.7 (vs. the average of 13.5)
  • Lower P/E, P/B, and P/S of 15.6, 3.3, and 4.2 (vs. the industry averages of 43.3, 6.4, and 6.5)
  • Lower Forward P/E of 10.5 (vs. the S&P 500's average of 14.0)
  • AMGN currently offers an annual dividend yield of 2.10%

Celgene Corporation

Celgene Corporation, with a market cap of $41.88B, is a global biopharmaceutical company engaged in the discovery, development and commercialization of therapies designed to treat cancer and immune-inflammatory related diseases. Celgene markets Thalomid to treat multiple myeloma and Revlimid, a less toxic thalidomide derivative, to treat myelodysplastic syndromes and multiple myeloma. Its MDS drug Vidaza, T-cell lymphoma drug Istodax, and breast cancer drug Abraxane were bought through acquisitions. CELG was down 2.61% and closed at $99.00 on February 25, 2013. CELG had been trading in the range of $58.53-$103.69 in the past 52 weeks. CELG has a low beta of 0.63.

JMP Securities initiated coverage on CELG with a Market Outperform rating and a price target of $130.00 on February 8, 2013. According to Yahoo Finance, analysts have a mean target price of $111.29 and a median target price of $114.00 for CELG. Analysts are estimating an EPS of $1.35 with revenue of $1.46B for the current quarter ending in March, 2013. For 2013, analysts are predicting an EPS of $5.67 with revenue of $6.11B, which is 10.90% higher than 2012.

There are a few positive factors for CELG:

  • Higher revenue growth (3-year average) of 27.0 (vs. the industry average of 13.6)
  • Higher operating margin and net margin of 31.7% and 26.4% (vs. the averages of 25.9% and 13.7%)
  • Stronger ROE of 26.0 (vs. the average of 13.5)
  • Lower P/E of 30.8 (vs. the industry average of 43.3)
  • CELG generates an operating cash flow of $2.02B with a levered free cash flow of 2.05B.

In short, with strong fundamentals and reasonable P/E, all three stocks are great long-term holdings. Investors should watch out for any short-term, major pullbacks as buying opportunities to establish the long-term positions. Investors can also review iShares Nasdaq Biotechnology Index Fund (NASDAQ:IBB), Health Care Select Sector SPDR (NYSEARCA:XLV), and iShares S&P Global Healthcare (NYSEARCA:IXJ) to gain exposure to these 3 stocks.

Note: All prices are quoted from the closing of February 25, 2013. Investors and traders are recommended to do their own due diligence and research before making any trading/investing decisions.

Source: 3 Solid, Low Beta Biotechnology Stocks To Buy On Dip