My No. 1 Long-Term Biotech Pick

Gilead Sciences (GILD) — On Nov. 19, 2012, I recommended this large-cap biotech at $37.20, saying it is “well-positioned to gain market share.”

On Aug. 9, at $58.82, I noted, “GILD is up 60% from our initial buy point. Investors who bought in November should protect their positions by writing calls or buying puts. Any weakness in the stock that results in a pullback to its 50-day moving average — around $55 — should be used to buy new shares.”

On Aug. 15, the stock retreated to $55.96, its 50-day moving average, and advanced to over $60.

S&P estimates operating earnings will increase 42% in 2013 and 50% in 2014. And EPS is estimated to be $1.86 in 2013 and $2.78 in 2014. New hepatitis C drugs and stabilization in market share for their leading HIV drug are expected to enhance future earnings, thus GILD should be high on the list of biotech stocks in investors’ portfolios.

Technically, the stock is in a clearly defined bull channel with support at its 50-day moving average at $57. With its internal indicators (MACD, stochastic, etc.) positive, GILD should be bought at the current market price.

The trading target is $67, but this stock should be positioned as a long-term hold with a 12-month target of over $80.

GILD Chart
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