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Protect Your Portfolio From The Coronavirus Crisis: Buy Gilead

Mar. 07, 2020 2:26 AM ETGilead Sciences, Inc. (GILD)GLPG, GLPGF83 Comments
Robbe Delaet profile picture
Robbe Delaet


  • The S&P 500 lost 10% since the recent highs as it looks like the number of ex-China Coronavirus cases is increasing exponentially. Many investors are questioning their investment strategy.
  • In this article, I want to provide an interesting strategy which will protect your portfolio to a worsening of the virus situation while still being able to benefit from improvements.
  • This strategy is based on buying Gilead, which will potentially be able to sell its Coronavirus drug Remdesivir in April, as its Phase 3 is initiated last week.
  • In my case, if the Coronavirus situation worsens drastically and the market would crash by another 20%, my losses will be limited to 9%.
  • Moreover, if you buy Gilead but the virus fades away, the company could still surge in the long term based on revenue growth expectations from new approvals. Buy Gilead.

There is a lot of uncertainty in the market that the number of Coronavirus cases will keep increasing exponentially. This could cost tens of thousands of peoples' lives and would impact the worldwide economy, which was already poor. Although the real consequences are still unclear, it will certainly keep the stock market low in the shorter term as fear is the stock market's worst enemy. As of March 5th, the S&P 500 (SP500) was down 11% from its recent February highs and down 7% YTD. Many investors are questioning the magnitude of the virus impact and its implications for the stock market. It is fair to assume that as a consequence of the big economic impact, as shown by the recent Chinese PMI which was lower than during the financial crisis, the stock market could fall by another 20% if this crisis intensifies. In contrast, if it fades away, the market could reach all-time highs soon, as general stock market fluctuations are hard to predict. How can we hedge our portfolio for a crash while still being able to benefit from an improvement? My answer is clear: buy Gilead (NASDAQ:GILD)! On the one hand, its drug Remdesivir has the highest potential to cure the Coronavirus. Consequently, the company could benefit from an exponential increase in the number of cases, which would lead to a higher stock price. Second, if the Coronavirus would fade away faster than anticipated, the stock could still gain significantly in the long term based on revenue growth anticipation from new drug approvals.

(Source: Tradingview.com)

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I've read a lot of different strategies on Seeking Alpha. First, you could just hold all your shares and try to buy more when the markets keep dropping. The problem with this strategy is

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Robbe Delaet profile picture
Voor Nederlandstalige beleggers - bezoek beleggersuniversity.com als je wil uitgroeien tot een succesvolle beleggerFounder of Insider Opportunities / A new way of investing (insiders+algos) with 43.6% annualized returns since 2010 / Made hundreds of investors successful and confident in this challenging market environment During my Master of Business Administration at the University of Ghent (Belgium), I got passionated by finance. When writing my master's thesis I got attracted by the under-appreciated power of the insider investment strategy.The theory is simple: by following insider (CEOs, CFOs, board members...) purchases, well-respected researchers have proven that you can outperform the market significantly. That's because this "smart money" knows better than anyone else when their stock is undervalued.But adopting it in your investment practices is not easy: there are 850 purchases reported by the SEC each month, off which only a small fraction is valuable to follow up. As I enjoy challenges, I decided to dedicate my life into building a strategy around this very promising theory.After years of empirical research, I discovered a revolutionary strategy based on insiders and algorithms which generated 47.2% annual returns since 2010 (3x the S&P 500). My IO Golden Value, Growth and Biotech algorithms pick out the winning insider purchases (on average 6 per month) based on fundamentals and valuations.I understood this unique strategy could be extremely valuable to investors like you, enhancing returns and strengthening one's confidence in the market. To start improving investors' wealth generation, I decided to find Insider Opportunities in 2020.Click here to discover Insider Opportunities 14 days for FREE.By joining our community, you'll have an edge compared to other investors to find undiscovered, undervalued stocks. You'll get exclusive access to our daily Insider at Breakfast articles, outperforming portfolios, weekly market updates, group chat with other investors, and much more.I'm always happy to talk with other like-minded investors and help them out. Don't hesitate to contact me any time!Yours sincerely, Robbe

Analyst’s Disclosure: I am/we are long GLPG, GILD. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (83)

Doc 224899 profile picture
Chloroquine costs pennies per dose. Remdesivir obviously will be quite pricey, since it's a fancy
designer molecule product.

The national pharma conversations have finally taken up the issue of chloroquine, though leadership in our national response has tried to keep US pharmaceutical companies in play because we can't afford to lose them, and for strategic national defense purposes we can't afford to live without them. We need to have the capacity to manufacture antibiotic/antiviral medications AND vaccines within mainland USA, and that market has been moved offshore because it hasn't been profitable for a long time.

Now, we need it within our national boundaries, and this is a newsworthy opportunity to make a pitch for such a business model that will achieve a national defense objective.

The market for antibiotics and antivirals and vaccines in the COVID-19 pandemic is Global, and WHO and CDC are both entirely aware of the science of chloroquine because it's been used for decades for, among other infectious diseases, malaria.

When global costs are taken into account, pennies per dose is quite attractive.

When national defense objectives are taken into account, given that pandemic zoonotic viral infections are increasingly common, we need our pharmaceutic companies to be well-funded because they can respond to urgent novel infections much more rapidly than government labs and academic labs can possibly slam it in gear.

Great scientists have migrated for decades into the private sector because faculty income doesn't quite match up to private sector rewards, and it's easier to get stuff done outside the constraints of government and academia.

In other words, we can no longer afford to characterize big pharma as a sinfully profit-oriented demonic enemy, as a straw man for progressives to target, as a deep well for trial attorneys to raid and plunder. We can't afford to chase the production of antibiotics and vaccines out of our national boundaries anymore.

We need them for our very survival, and our government is teaming up with our scientific communities to make a gigantic turn in our national conversation and financial markets to rescue them and siphon dollars in their direction.

Therefore, invest in pharma. GILD is a safe bet. So are others.
Brecht Hanssens profile picture
Anecdotal evidence of it really working (compassionate use), a nearly 4% dividend yield, a panicked president willing to do anything for re-election, research note leaking (Piper), a US company that can be touted as 'American technology saved the world', huge huge volume on the close (over 2 mill shares) and a press conference with little Trump announcing 'great news'. It's easy to spot for those willing to see it.
Robbe Delaet profile picture
@Brecht Hanssens It is indeed looking really good for Gilead investors.
Just like putting the FED under pressure, I believe Trump will do the same with the FDA for approval of Remdesivir.
Today I've sold everything, just to put all into GILD! I think when the people/market realize that Remdesivir will cure the Corona-pandemic, there will buy a buying-paninc on GILD!
djwiliams24 profile picture
Take a look at this article from the New England Journal of Medicine. It is just one sample, but the speed of recovery after taking remdesivir is remarkable, I don't think it's coincidence.

I think remdesivir is the real deal.
Robbe Delaet profile picture
@djwiliams24 thanks for sharing this! Looks promising indeed...
EliasMouawad profile picture
@Robbe Delaet Nice article. The best part is the expected approval in April. Two awful weeks left !
Robbe Delaet profile picture
@EliasMouawad thank you! Let's hope for an approval, both for humanity and for Gilead. Recent leaked results are very promising!
Great report, any views on REGN's anti-viral in testing at the moment?
time to sell Gild: www.fox46charlotte.com/...
Robbe Delaet profile picture
@otto1234567890 such compounds can't just go on the market. They need to get approved by the FDA. Remdesivir is one step ahead of everyone when we are talking about time.
you must be a short because this is a joke, and shorting gild is a huge mistake at this point.. nice weekend
pro8 profile picture
Remdesivir is already in PHASE 3 testing they are far ahead of anything else that is out there. People don't understand what that means. You just can't claim you found a cure without doing proper and formal testing, many are ignorant of that.

I read an article a few days ago about an Israeli company actually having a vaccine. Needless to say they will have to go though the same process that every drug goes through , you just cannot go giving people a drug without proper testing especially one you want to give the public at large.

Even the article above the researchers admit that the compound their computer came up with may not work. Common sense is out the door with all these supposed cures and vaccines... The medical community themselves have came out and said it will take months to test many of these drugs with no guarantees. We've had FLu vaccines for years and people still get the flu even after getting the vaccine... This years flu vac has been found to be effective to the flu types circulating of ~45% IOW 55% of people who got the vac ended up with the flu.

There is no magic pill would be a very smart guess and we may need to get used to living with this virus. GILDS drug seems to be the best at fighting it when it comes to severe cases and that is a plus like even the flu vaccines now in use at 45% efficacy and not everyone dies from getting the flu or COVID-19 .
a good read
Isn't INO also going tp being testing in April? What makes you think that GILD is a better investment opportunity?
Robbe Delaet profile picture
@Maverick65 I haven't heard about INO yet. The interesting part about GILD is that the company is undervalued even if its Covid-19 drug won't be approved. It's a cash flow beast with good products in its pipeline.
INO looks to be a one-trick pony. If its drug fails (or the virus fades away), the stock will go down significantly. It's too risky for my investment strategy.
INO is trying to make a vaccine while
Remdesivir is a chemical drug to heal against virus like antibiotic drug is against bacteria, yeast pathogens.
Vaccines generally take 12 months + to test for adverse side effect on babies,kids, elderly etc....subject to a lot of potential lawsuits as vaccines injected to Billions of HEALTHY people vs
Chemical drug is for millions who are SICK .
It is APPLES & ORANGES comparison.
pro8 profile picture
GILD has actually made big profits INO never has at this time. When it comes to an investment there is no comparison..Gild may drop 30% INO may drop 400%
Doc 224899 profile picture
Another possible case against GILD profits: chloroquine. This is an old drug in the quinine family, inexpensive enough that it can be used as an antimalarial in poor third-world settings.
There are multiple possible side-effects, some irreversible, that keep it from being a first-choice in more prosperous nations, and we don't know how much is being used in China and how it stacks up against much more expensive drugs like remdesivir.
Robbe Delaet profile picture
@Doc 224899 chloroquine is indeed named in several papers as possible drug to treat Covid-19 together with Remdesivir.
However, given that the WHO names Remdisivir as only drug to treat it & we don't get much information about Choloquine its potential approval date, it looks likely that Remdisivir will be chosen.
Doc 224899 profile picture
Three reasons to wonder if GILD has already made all the gains it can achieve.

Chart factors show price is approaching a range of solid resistance, and RSI is in or near showing "overbought". Whenever we see emotion-driven parabolic rises like this, in a unique market bubble, "what goes up, must come down".

Political and emotional factors are affecting GILD prices, and an uphill struggle with the FDA is inevitable, all of which are likely to put American drug development behind the pace of drug development in the rest of the world. The Chinese are almost certainly stealing remdesivir, and will be selling it to the rest of the world before Gilead gets a chance. In the USA, remdesivir pricing will be subjected to all sorts of downward pressure from advocates and politicians.

Profit-taking in a furiously down market is inevitable, suppressing share price.
Robbe Delaet profile picture
@Doc 224899 parabolic rises? C'mon man, the stock comes from $120 in 2015 and has only risen by 23% YTD. The stock has been too cheap for too long and is still valued at only 12x its free cash flow.

How are the Chinese stealing Remdesivir as Gilead got several Chinese patents approved recently? Please, explain.

Agreed that pricing won't be high, but its not necessary for Gilead.
Doc, you note a reasonable possible market reaction. But there is a significant possibility that GILD blows through resistance levels and becomes a growth or even mania stock near term.

If that happens 40 times a slightly better earnings forecast could support a run towards $300.

Gild is a dangerous short.
Read your article the other day and bought GILD. Scared out yesterday premarket and lost out on yesterdays gains.Its only money i will jump back in Monday and ride this momentum.China seems to be coming back to life and they like it.WTF
Robbe Delaet profile picture
@Mbocksnew glad to hear that you made some good money following my recommendation earlier. At that price, Gilead was a steal, but I am still confident in holding these shares much longer.
Thanks for the confidence.
Tamiflu Edit

He worked as part of the DNA synthesis group at Genentech from 1986–1990, before joining Gilead in 1990 as Director of Organic Chemistry.[3] In 1993, he began work, as head of a team, to create Tamiflu. In 1996, clinical studies were carried out on the drug, which was the first orally active commercially developed anti-influenza medication. Explaining the motivation behind this, he said, "We decided to create a pill and not a medication to inhale because especially people who suffer from influenza struggle with breathing difficulties. And the agent would only reach the lung,"[4] Three years later, the right to market and develop Tamiflu were sold to Roche, with Bischofberger and Gilead retaining the intellectual rights to it.[1][5]

Bischofberger has publicly displayed pessimism over the risk viruses pose, saying, "I think the threat by new bacterial or viral agents is higher than the potential of a nuclear war."[
How soon people forget.. WHO not World Health Organization.. I mean WHO DEVELOPED TAMIFLU ?? Blockbuster Drug... It wasn’t ROCHE .. that’s right GLTA
realtime data for Covid19
should not use the word real-time but last update. more link
dan p profile picture
dan p
07 Mar. 2020
One issue not talked about. The Gilead drug stops the growth of the virus. It is very possible that this drug will be effective against future viruses.

Instead of trying to invent a new vaccine each year we can use the Gilead drip to stop new viruses in their tracks. I have no doubt other companies will work to replicate its drug.

I have owned this company for at least 10 hursts and I will own it at least another 10. The story of what this company can achieve is far from over.
Robbe Delaet profile picture
@dan p you are right. There have been numerous articles published about higher probability for other virusses after the Coronavirus.
Remdesivir has shown efficacy in Ebola, MERS, SERS etc. and thus could also work on many other future viruses.
Gilead is a great company which cured HCV and HIV already and will cure many other viral diseases in the future.
Unfortunately, the markets don’t reward “cures” . . . .
Robbe Delaet profile picture
@JDoe20 the market isn't always rational. It does reward cures in terms of multiple expansion, as investors get optimistic about the company. Moreover, Gilead should really be able to grow significantly over the coming years with many new drug approvals.
OverTheHorizon profile picture
Excellent analysis n commentary. Pretty much agree on all points including the under lying value of GILD even wo CV.
apple long profile picture
A recent publication on remdesivir shows that remdesivir works by either binding to the active site of CoVId19 RNA polymerase and acts as a substance analog or active site inhibitor or it binds RNA and truncates the Viral RNA from binding to the Polymerase active site. Neat stuff !
Robbe Delaet profile picture
@apple long I believe you are talking about the studies on the monkey cells? Do you have a link on this?
danwatson888 profile picture
Prophylactic and therapeutic remdesivir (GS-5734) treatment in the rhesus macaque model of MERS-CoV infection
Published: 04 February 2020
Remdesivir and chloroquine effectively inhibit the recently emerged novel coronavirus (2019-nCoV) in vitro
Dan - long ($GILD)
Robbe Delaet profile picture
@danwatson888 thank you! As I expected, this is the treatment of monkey cells. These results were very encouraging, but we need to keep in mind that the efficacy on human cells can always be different.
PACKER man profile picture
...AND don’t forget that handsome dividend!!
Robbe Delaet profile picture
@PACKER man you are right, a steadily growing, handsome dividend with much room for expansion given the 9% FCF yield. What's not to like? :)
Enjoyed your post and strategy. Did something similar about a month ago except that I went 20% GILD and 1% cash. Guess I’m a little aggressive for a 78 year old.
One question, they keep mentioning four billion dollars as the projected revenue for Filgotnib. That seems very low to me.
Your thoughts?
Robbe Delaet profile picture
@ttmburns glad that you like my posts! It's pretty hard to forecast Filgotinib's sales. One thing which will be important for sure is a black-box warning or not. Filgo has shown very superior safety results, but it is not sure if the drug will still get a bb-warning. If not, they will be able to use this in their marketing strategy, which could benefit sales.
However, it will be pretty hard to compete against Abbvie's Rinvoq, which makes me a bit more cautious.
In fact, I am a lot more bullish on GLPG'1690 which will read-out its phase 3 in early 2021. If it can show similar results as in its phase 2, this drug could see even higher sales than Filgo. Will definetely keep you updated on these events!
cemanuel profile picture
"The problem with this strategy is determining a good entry point."

Not sure why this is a problem. Come up with a system, use it to set a price and wait (or buy). Takes a little work but it's not really a problem any more than spending some time shopping for a car is.

My buy point for GILD is $65. Added more in December. Not adding more at this price. Earnings - in particular revenue growth - don't support it IMO.
Robbe Delaet profile picture
@cemanuel who says that the market will not drop by 50% as this was the longest bull market in history, supported by massive indebtness?
If you buy at these levels, it's possible that your losses will be huge.
I like Gilead as it will not suffer from a crash, but also can provide much upside if the market recovers.
I purchased at $67 earlier, but think that at these prices it is still worth to buy the stock. Current growth does indeed not support an increase in share price. However, you need to take into account that Gilead was valued as if earnings would go down by another 30%.
Moreover, if you followed Galapagos and Forty Seven, you know that Gilead could see strong growth in the longer term. Galapagos for example has 4 potential mega-blockbusters in its pipeline.
cemanuel profile picture
"who says that the market will not drop by 50% as this was the longest bull market in history, supported by massive indebtness?"

Wouldn't that be fantastic? The whole market on sale! But while I can hope the same as someone can say GILD "could" see strong growth I prefer to invest based on "did" and "is."

I also prefer to set a target price based on past performance. In the case of GILD this is about a 10X PE multiple.

There are folks who momentum invest and do very well. That's not how I do it. I won't say I'll never buy something trading at its 52-week high but it will be pretty infrequent.
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