Gilead Sciences is one of the best companies in biotech. They’ve created an incredible HCV franchise, have worked heavily in the HIV arena and have promising data to share with regard to hepatitis B. However, for some reason on the balance of fear and greed, investors remain fearful. However, if you really want to make money in the market, it’s a good idea to get greedy when others are fearful and fearful when others are greedy. As Gilead Sciences enters into oversold territory, it’s time to put this idea into action.
GILD RSI Falls Below 30
The Relative Strength Index (RSI) is a commonly used tool by investors that measures momentum on a 0 to 100 scale. When the RSI on a stock falls below 30, that means that the stock is oversold, or in other words, investors are becoming fearful when it comes to the stock. In yesterday’s trading session, Gilead’s RSI fell to 29.5. At this point, GILD is officially oversold. In recent posts, I’ve talked about the fact that GILD has been presenting incredible opportunities recently. At this point, that opportunity is almost hard to pass up!
What Caused Investor Fear?
Gilead was a strong stock displaying strong upward momentum. So, what led to the oversold conditions? There have been two events this year that struck fear into the hearts of Gilead Sciences investors…
- AbbVie Inc (NYSE: ABBV) – Earlier this year, AbbVie released a hepatitis C drug that investors thought would be a major threat to Gilead Sciences’ HCV franchise. Ultimately HCV is where the vast majority of GILD revenue comes from, so, it only makes sense that this would strike fear for investors. However, as the months passed, GILD continued to produce better and better earnings reports. The HCV franchise wasn’t harmed and fear started to die down.
- Hillary Clinton – Soon enough, presidential candidate, Hillary Clinton would make statements with regard to “price gouging” in the pharmaceutical industry. She outlined a plan that would force biopharmaceutical companies to reduce drug costs dramatically for chronically ill patients. This would prove to be a hindrance for GILD if this passed. However, I don’t think it ever will. After all, Hillary will have to be elected to get this vote in and with the email issue that’s plaguing her name all over the media, I couldn’t imagine that being the case!
This Leads Us To The Opportunity Side Of Things
The reality here is that GILD has maintained an incredibly strong HCV franchise, even in the face of the overwhelming competition brought by ABBV. The company continues to innovate new treatments in HCV indications and other ailments! While I can understand investor concern with regard to drug pricing, I don’t think that this will prove to be a valid concern in the long run. Simply put, GILD remains one of the strongest companies in biotech, and at current levels, arguably the best investment that one could make in the sector.
Think about it this way… Fearful investors have dragged the stock price down to incredible lows. This leads to a great PE ratio; one that’s seldom seen in the sector. With strong approved products, an amazing pipeline of prospects, and a low price, it’s hard to find a reason that you would want to stay away from this stock. All in all, GILD is likely to see massive gains moving forward, and getting in at the current level will likely prove to be more advantageous than just nearly any other move made in the market today.
What Do You Think?
Where do you think GILD is headed and why? Let us know in the comments below!
[Image Courtesy of Bloomberg]