Newspaper article Sarasota Herald Tribune

Company May Be Whipping Up Important Drugs, and Profits

Newspaper article Sarasota Herald Tribune

Company May Be Whipping Up Important Drugs, and Profits

Article excerpt

In an effort to counteract the vagaries of Wall Street, investors are often persuaded to chase phantom opportunities in a relentless but futile pursuit of unrealistic gains. The apparitions of wealth that continually mesmerize and beckon the unsuspecting remind one of the Sirens in Greek mythology whose seductive songs lured sailors to their deaths.

Meanwhile, gullibility is rich fare for those who feast on the carrion of the uninformed. To quote from "Idiot America" by Charles Pierce, "Fact is that which enough people believe. Truth is determined by how fervently they believe it."

There is no fault in listening to the myriad of investment ideas. It is when you act without sufficient due diligence that the price tag escalates exponentially.

Ignore the endless parade of parasitic investment letters, TV performers and commission sales people, all touting the same repetitive monologue: They have the keys to hidden wealth ... and you do not ... but you could. Believe me, if they really had the answers they would not be living off subscriptions, advertisers and commissions.

Now I know what you are thinking, so where are my investment ideas of late? That is a good question, so let's look at Gilead Sciences.

A year ago, I wrote that Gilead, a biopharmaceutical company that discovers, develops and commercializes human therapeutics for the treatment of life-threatening diseases, would post 2011 earnings of $4.00 per share, with a 12-month share price estimate of $48, for a capital gain of 15 percent. Unfortunately, earnings were only $3.86 per share -- yet the price of the shares recently closed at $51.60.

The company's strengths can be seen in multiple areas, including revenue growth, reasonable valuation levels, solid stock-price performance, expanding profit margins and a solid financial position with reasonable debt levels. On the negative side is its subpar growth in net income, as seen in last year's number.

Looking at first-quarter results, revenues increased 19 percent to $2.28 billion, compared with the first quarter of 2011. Net income for the first quarter was $0.57 per share, compared with $0.80 per share a year ago. But the earlier number included acquisition-related compensation expenses of $0. …

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