Equity Clock

Shares of Gilead have lost more than a quarter of their value since April of this year as concerns about patents covering medicines key to the company’s business begin expiring in a few years.   The stock, as a result, is trading at a P/E of just over 9.   The five year average P/E is closer to 20.   The company recently reported earnings that missed expectations, yet year-over-year net income growth amounted to 25% while revenue rose by 17%.   The company continues to generate growth despite the uncertain outlook.   Technicals have provided a buy signal by way of a bullish moving average crossover that suggests strength may once again find this stock.   The stock has not traded at these levels in four years and the volume during Tuesday’s session of nearly 4-times its average suggests that investors are committed to the investment at this level.   Seasonal tendencies are positive for the stock between now and September for gains of 15% on average.   Takeover news has flourished in the biotech industry as of recent, the benefits of which have no doubt bolstered this stock to some extent in the past few days.   There is some risk that this stock may falter, along with other biotech constituents, once an appropriate suitor is chosen for merger & acquisition, but for the time being the potential upside in the stock is undeniable.   Seek further signs of conviction to a move to the upside, such as outperformance compared to the market and a break-out above current depreciated levels.

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