Tag Archives: NASDAQ:GILD

Stock Market is High: Time to Stop Buying Stocks?

The stock market is trading near its all-time high. Morningstar revealed that of the 682 U.S. stocks that its equity analysts cover, “only 5(!) have 5 stars, while 83 receive a single star.”

For those who are not familiar with Morningstar’s star system, 5 stars represent super undervalued while 1 star represents super overvalued. 

The Volatility Index, the “Fear Gauge” or “Fear Index” is a 30-day forward-looking measure of the volatility of the market. The lower the VIX is at, the less fear or more complacent the market is and vice versa. The Volatility Index also suggests there’s little fear in the stock market right now. 

Source: Stockcharts – Volatility Index

Although Morningstar covers less than 20% of the stocks on the U.S. market, its coverage includes many prominent names across different industries.

Should investors stop buying stocks in a high market? As the stock market has ascended to new heights, it has become more difficult to find value, but they do exist if you look for it.

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What I’m Doing With My Gilead Sciences, Inc. Shares

Gilead Sciences, Inc. (NASDAQ:GILD) shares have declined 40% since July 2015. Some investors have sold the stock and moved on. I wondered if I should do the same. I’ve decided to hold on for now. Here’s why.

Is Gilead Sciences priced at a value?

The company experienced tremendous earnings growth in 2014 and 2015, but its falling earnings since 2016 are expected to continue their slide for at least two more years.

Think of it this way, though, if the 2018 earnings-per-share forecast of $7.75 materializes, that will still be a CAGR of 30.6% over five years from 2013 to 2018, which will still be an amazing rate of growth that’s not easily found in such a big company.

Using that same $7.75 EPS, Gilead would be trading at a 2018 multiple of about 8.9, which would still be an attractive buy for a company that maintains its profitability. And if Gilead starts showing any hint of growth, the stock will surely start heading higher.

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Top 10 Health Care Stocks: Which To Buy? Part 3

Year to date, the SPDR S&P 500 Trust ETF (NYSEARCA:SPY) has outperformed Health Care ETF (NYSEARCA:XLV). The SPY has risen 6.6%, while the XLV has appreciated 4.1%. However, over the 5-year and 10-year periods, the XLV has outperformed the SPY. So, now that the Health Care sector as a whole underperforms the market in the short term, it may be time to consider investing new money in the sector.

Out of the three major drug manufacturers, Johnson & Johnson (NYSE:JNJ) is the highest quality and provides the steadiest growth and returns. However, it’s also the most expensive. To get a better value, consider Pfizer Inc. (NYSE:PFE) and Merck & Co., Inc. (NYSE:MRK) which trade at lower multiples with higher dividend yields to start.

To get more value and to maintain high quality, consider Amgen Inc (NASDAQ:AMGN) which trades at a reasonable multiple with an estimated growth of north of 7% per year and pays a safe and growing dividend.

UnitedHealth Group Inc (NYSE:UNH), Allergan plc (NYSE:AGN), and AbbVie Inc (NYSE:ABBV) are expected to deliver above average growth rates of more than 13% and they’re priced at reasonable valuations. However, investors should note AbbVie’s above-average debt levels and Allergan’s below average credit rating of BBB-.

Bristol-Myers Squibb Co (NYSE:BMY) and Gilead Sciences Inc (NASDAQ:GILD) are opposites. The former trades at more than 30x earnings with a growth rate of 20%. The latter trades at 7x earnings with a growth rate of 3%. Bristol-Myers is a growth play and Gilead Sciences is a value play.

The above is an excerpt from my Seeking Alpha article. So, to learn more about earnings estimates and dividend information of each company, check out the article here: Top 10 Health Care Stocks: Which To Buy? Part 3

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Disclosure: At the time of writing, I own shares in AMGN, ABBV, and GILD.

Disclaimer: I am not a certified financial advisor. This article is for educational purposes, so consult a financial advisor and or tax professional if necessary before making any investment decisions.

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