Okay, news came out that Gilead Sciences (the powerhouse of the HIV and soon HCV market) had a relapse in their clinical trial of GS-"whatever". On Friday, Gilead dropped like a rock because some Wall Street schmucks decided that that would be negative to the company's future outlook.
People, this is a company that has one of the most prestine management and has been experiencing monumental growth for the past 10 years. The company has allocated capital in such an efficient way, they had no choice but to say, "Hey, let's go to a $100 billion company." Okay, so that's far away even for a company like Gilead who has been growing at a 40% rate.
The real question lies in how far the shares will drop until it's a buy that knocks you upside your head. I agree with the guy who says that Gilead was slightly overvalued before it tanked on Friday; which means it still has a little while to go before my 85 year old grandfather tells everyone he knows he's buying in.
It's funny how a company so solid as Gilead who manages Atripla, Truvada, Tamiflu and many other solid drugs can be spanked like a bad child when a little hiccup in a far-fetched clinical trial arises. It makes you wonder what should happen to terrible companies when something like this happens.
What will happen is that this new HCV drug will go along as planned, start to make billions after 2014 along with its partner, the "Quad". This is the long-term approach that can be played by the the most rudimentary of minds. If it continues to sink, bet your bottoms that those who bet big on their success in the future will be glad to know more than any Harvard MBA who sold last week.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.