Each year Steven Halpern, editor of TheStockAdvisors.com, surveys the leading financial newsletter advisors asking for their favorite stocks for the coming year. This article is part of his 24th annual Top Picks Report.
Gilead Sciences, Inc. (NASDAQ: GILD) is a favorite speculative idea for 2007 from Bill Martin, editor of FindProfit. The advisor explains, "Gilead is best known as a biopharmaceutical company with a leading HIV treatment franchise (Viread, Truvada, and Emtriva).
"Gilead is also a player in the fungal infection area, with treatments for chronic hepatitis B and influenza. Gilead's Tamiflu product is licensed to Roche, which produces and markets the product. The company has had a wonderful growth run in recent years, and now commands a $30 billion market cap.
"Trading just above 25 times 2007 earnings estimates, the stock is obviously not a bargain on the surface, but we believe that the stock remains a compelling investment opportunity, with several key drivers in hand.
"Foremost, Gilead's HIV franchise is truly best-in-class, and recent advances (including unique 'one-pill-a-day' regimes) and international expansion should power the company to double-digit growth in the coming years. Also two recent acquisitions (Myogen for $2.5 billion and Corus for $330 million) have materially improved GILD's pipeline, which was previously looking somewhat barren in the medium term.
"The key risks to Gilead at this point are threefold: 1) the company is heavily dependent on its HIV franchise, and thus exposed to potential competitive risks; 2) Tamiflu may become less effective against the Avian Flu as it mutates, leading to lower market demand in the future; and 3) management needs to build GILD's pipeline and
execute against its recent acquisitions.
"Despite these risks, we view Gilead as an attractive opportunity, as the company levers its unique competitive advantages and still nimble size. With traditional pharma struggling to grow, and many of the big-cap biotechnology names such as Genentech and Amgen running into the law of large numbers, we think GILD will increasingly look mighty attractive to investors in this sector."
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