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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Paul Senior who wrote (57811)	8/19/2016 9:00:33 AM
From: Micah Lance	1 Recommendation Recommended By E_K_S Read Replies (1) \| Respond to of 78753

Two quick notes: 1) on my EV calc, I missed something. I originally stated their EV is ~$120 billion, however this is incorrect. Gilead domiciles a lot of their cash overseas to protect it from taxes and they note this cash as "long-term marketable securities." This overseas cash amounts to $15.9 billion making their EV ~$104 billion, with a TTM FCF of ~$17 billion this gives GILD an EV/FVF of 6.1 instead of the 7.1 I initially stated. Much of their operations are domiciled overseas, so this cash is readily usable for those operations 2) The initial growth experienced by GILD was due to an acquisition. In 2014 it bought the drug company that made Sovaldi which is one of its highest selling drugs, so a few acquisitions could be a pretty great catalyst for GILD. Will they repeat the massive success of that deal? Probably not, but with over $24 billion in cash they have a ton of room to make an all cash offer for quite a few companies that could offer significant revenue growth. To me, this is a cash cow of a company trading at really low multiples that has significant opportunity to expand either through their own pipeline or through acquisitions of other firms. Off topic, in one of my grad classes last spring the professor discussed a study that said a key indicator of success for a company is it's tax rate. The study showed it's one of the more reliable metrics to determine how a company will perform over the next few years. Has anybody heard of this or seen this study?

To: Paul Senior who wrote (57811)	8/19/2016 9:36:18 PM
From: Micah Lance	Respond to of 78753

Paul, I should add that none of this stuff makes sense to me either. In my (very early) research, I have been told by those with more experience that it's important to find drug pipelines that have "mechanisms of action" similar to those drugs that have been approved. Basically this means how the drugs interact and work within the body. I mention this b/c Gilead is the only company in the HepC and HIV markets with drugs that work in certain ways that have proven to be most effective. They have done this with multiple drugs for HIV and are in the process of doing the same for HepC. It seems they have some sort of proprietary knowledge in these areas that has given them dominance in their respective markets. If they pair these two markets with another market like the cancer market (8 drugs in their pipeline, 3 in phase 3 trials) then they could experience significant growth. Management seems to be pretty great and it seems like this is more of a "glitch" like Ken Fisher mentions in super stocks. I could be wrong but with their cash position and free cash flow it seems like they have a good chance to grow from here.