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  • American Capital Agency Corporation And One Other Stock Can Fund My Retirement [View article]
    I made the mistake of having 40% of my retirement portfolio in AGNC back in 2013 and paid the price, mostly because I did not understand the factors affecting mREIT net asset value and dividend sustainability at that time. I also had a false sense of security based on the bullish analysis of others who projected only $25/share or so as the downside risk. We all know what happened. My allocation is currently about 12% of my retirement portfolio (25% of equities) which I feel comfortable with at its current 16% discount to NAV, especially having had the experience of going through the 2013 fiasco. If conditions suggest threats to NAV and dividend sustainability, I would most likely reduce my exposure.
    Mar 4, 2015. 05:17 PM | 2 Likes Like |Link to Comment
  • ModernGraham Quarterly Valuation Of Celgene Corporation [View article]
    I calculated Celgene's net present value assuming a 25% earnings growth rate for the next 5 years (per Morningstar), 15% for the subsequent 5 years, and 10% growth thereafter. The calculated values were $200/sh using a 10% discount factor and $320/sh using an 8% discount factor. No share buybacks were assumed. So this tells me that if the growth rate assumptions are reasonable, the shares are currently undervalued. Time will tell if growth unfolds as projected. Long Celgene.
    Feb 26, 2015. 12:26 PM | 11 Likes Like |Link to Comment
  • Updating My Price Target On Gilead Sciences [View article]
    First of all, Alex - a very good article. My thinking is that Gilead is now a value stock with probably only mid single digit revenue growth for the next several years. Like all stocks, it deserves a P/E of 1 to 2 times its growth rate, and appears to be reasonably valued at present. Accordingly, your price target of $115 (one year I assume) appears very reasonable to me. As we learn more about competition and discounts in the HCV space in the quarters to follow, this target can be revised one way or the other. The aggressive price targets by others seem to be based more on hope and wishes than on any other rationale.
    Feb 24, 2015. 07:43 PM | Likes Like |Link to Comment
  • Gilead: All Is Still Well Down On The Farm [View article]
    The main issue with Gilead is whether it is a growth stock anymore. To see this, look at the top line. Revenues in 2014 were $24.9 B. They have guided to $26-27 B in 2015 which amounts to only a 4-8% increase. Yes, EPS will grow much more this year as the high margin HCV segment will have a greater contribution, and EPS will be aided by buybacks. But EPS growth could stall in 2016 if there is further HCV drug discounting. These factors keep the stock price in check until more data become available.

    I have been and still am long GILD, but my expectations have been tempered over the past few months.
    Feb 24, 2015. 10:19 AM | 7 Likes Like |Link to Comment
  • Apple Investors Take Note - Samsung And Xiaomi Are On The Attack [View article]
    The problem with all the negative comments about this article is that the main issue won't be resolved until the second half of this year. Apple's F1Q15 was expected to be a blowout by Blair, and it was. Blair expects another very good quarter or two, but then a slowing of revenues. All the negative commenters are extrapolating off of the single blowout 1Q15 data point. I feel that 2015 will be a record breaking year with net income in the mid to high $40 billion range. But when Apple gives F1Q16 guidance with their October report, I believe that it will show a decrease in YOY revenues. If the stock hasn't sold off prior to that, it will then. Right now we're in a game of musical chairs while the stock sets new highs on exuberation. But keep an eye on a free chair so that you can move quickly when the music stops.
    Feb 23, 2015. 09:49 AM | 2 Likes Like |Link to Comment
  • Carl Icahn's Apple Price Target Appears Unrealistic [View article]
    Sales in the Icahn proposal are way too high. Net income growth will therefore be much lower. But for 2015, it should be higher than your $44 B. There is no way it will come close to the $71 B by 2017 in your table. EPS growth even with buybacks will be only single digit. The stock is currently overvalued. This will become clear as data becomes available in the second half of this year.
    Feb 20, 2015. 10:32 AM | Likes Like |Link to Comment
  • Gilead Sciences, Future Dividend Aristocrat In The Making [View article]
    Gilead's big jumps in revenues and net income last year were a result of its HCV segment, so the nearly 300% net income growth was a one-time occurrence. Growth from here is not so clear. They guided 6-10% revenue growth this year and will probably beat. New products will add to growth after that, but they could see more competition in the HCV space leading to further discounting. I'm in the camp that 6-10% is a fair projection for long term growth. If so, it's now a value stock, and dividend growth is important. I believe the stock is fairly valued at present, pending how the HCV business plays out in the long term. Good article Doug. Disclosure - I'm long GILD but sell OTM calls against my position.
    Feb 18, 2015. 08:46 PM | Likes Like |Link to Comment
  • Halliburton Laying Off Workforce, Long-Term Growth Prospects Remain Intact [View article]
    "Shares currently trade close to the $44 mark, at 10.76x their earnings." Yes, but 20% of their projected 2015 earnings (stated in your article) of $2.15.
    Feb 17, 2015. 09:59 AM | 2 Likes Like |Link to Comment
  • The Long Case For Gilead Sciences, Inc. [View article]
    Exactly my thought. Why was this article published?

    As to valuation, a P/E of 14, although low compared to the biotech industry, is high compared to its estimated EPS growth rate of 5-10% (a portion of which is engineered through buybacks). GILD is fairly valued at present. To get much higher, it will have to demonstrate higher growth.
    Feb 17, 2015. 09:53 AM | 1 Like Like |Link to Comment
  • Gilead Fundamentals Appear Better Than The Stock 'Is Suggesting' [View article]
    The problem with valuing Gilead is that it is near impossible to forecast net income over the long term with any degree of accuracy. Not only revenues and margins from the HCV segment because of the heavy discounting, but the timing, pricing, and revenues/margins from all the new drugs in the pipeline. I'm sticking with the 5-10% EPS growth that others have projected (partly from organic growth and partly from buybacks). With the current P/E of 11, the PEG is in the range of 1 to 2, which suggests that the stock is fairly priced. It will only work its way higher when we see more evidence of higher long term growth. That could take several more quarters.
    Feb 14, 2015. 09:02 PM | 4 Likes Like |Link to Comment
  • Apple: Pride Comes Before A Fall [View article]
    Michael, I expect you to be vindicated sometime during the second half of this year. And for those of you that are long Apple, I advise you to listen very carefully to when the music stops, and then jump for an empty chair.
    Feb 13, 2015. 07:20 PM | 7 Likes Like |Link to Comment
  • Gilead Management's Conservative Guidance Offers Investors A Dip To Buy Into [View article]
    Gild is currently fairly valued based on its 2016 projected growth rate of 8%, and that's the problem. Until they can demonstrate a higher long term growth rate, the stock will have difficulty working its way a lot higher, e.g., the 50% increase that you are looking for.
    Feb 13, 2015. 07:15 PM | Likes Like |Link to Comment
  • Gilead: No Reason To Panic Here [View article]
    Bret, I'd like to comment on your amazement at how the market apparently undervalues large cap growth stocks that have delivered stellar returns and are still cheap on a valuation basis. E.g., Apple and Gilead.

    First, let's talk Apple. One can't extrapolate from a single quarter's results or even a single year's. One needs to see results for another year or so to see if consistent double digit earnings growth has reemerged. I'm in the camp that thinks that growth stalls next year to the low single digit range. My reasoning is based on their business model which depends heavily on iphone upgrades, many of which will have been made this year. Accordingly, I see that stock as currently overvalued, even with its low P/E, as I see low long term growth from here. I expect a selloff later this year as this becomes apparent.

    Now Gilead. First of all, let me say that I'm still long but recently sold OTM calls as my expectations have tempered. I agree with your 6-10% earnings growth projection, but see this as long term rather than just for this year. Accordingly, even though the P/E is low compared to the biotech industry, the PEG (in the 1 to 2 range) is reasonable, and so I think the stock is currently fairly valued. It should now be considered a value stock until proven otherwise.
    Feb 13, 2015. 06:57 PM | 3 Likes Like |Link to Comment
  • Comments On Gilead's Quarter And The Road Ahead [View article]
    Well thought out article that addresses all the important issues.

    Long term annual EPS growth is now estimated at 5-10%, partly organic and partly from buybacks. With the P/E roughly 10 based on 2015 projected EPS, the PEG is currently in the 1.0 to 2.0 range, suggesting correct valuation.

    I feel that until growth can be better established, the stock will trade about where it is now.

    Still long GILD but considering selling OTM calls a few months out.
    Feb 11, 2015. 02:23 PM | 2 Likes Like |Link to Comment
  • Bad News For Gilead Sciences Is Great News For Investors [View article]
    The problem in your analysis is GILD's 3-5 year projected growth of 25.2% shown in the last table. This year's 8% projected growth is reasonable, but the long term growth rate is not. I expect long term growth to be more in line with this year's. If so, the PEG is about 1.0-1.2 and is reasonable. I'm still long GILD.
    Feb 10, 2015. 09:58 AM | 2 Likes Like |Link to Comment