Exciting time! From the proceeds of selling Norfolk Southern and Chevron after recognizing some gains, we purchased Gilead Sciences (GILD). Yay!!!! I can’t really hide my excitement.
Can you feel me?
I think I may be addicted to purchasing solid companies and their future prospects with cash that I have. It really feels amazing to buy successful companies. All I need to do is to just sit back and drink some beers. Well… I want to say that it is not really an addiction but a lifestyle. Who cares? It is a great addiction to have.
Enough of the addition, let’s get to the point!
Gilead Sciences, Inc., incorporated on June 22, 1987, is a research-based biopharmaceutical company. The Company focuses on the discovery, development and commercialization of medicines in areas of unmet medical need. The Company’s principal areas of focus include human immunodeficiency virus (HIV), liver diseases, such as chronic hepatitis C virus (HCV) infection and chronic hepatitis B virus (HBV) infection, cardiovascular, hematology/oncology and inflammation/respiratory. Its Nimbus Apollo program includes the candidate NDI-010976, a hepatotropic allosteric Acetyl-CoA Carboxylase (ACC) inhibitor, and other preclinical ACC inhibitors for the treatment of non-alcoholic steatohepatitis (NASH), and for the treatment of hepatocellular carcinoma (HCC) and other diseases. Its Nimbus Apollo program is a Phase II ready clinical program for NDI-010976 and related metabolic and liver diseases (Reuters).
It recently dropped by about 30% and of course that’s when I pull the trigger. (source:TD)
Such a strong company with basically everything I wanted. This company is a cash printing machine. Probably no company in its size makes money faster than this company. Just to put it into perspective, in 2015 fiscal year, Gilead made about $20,000,000,000 cash from operations. That means they make about $55,000,000/ day, $2,300,000/ hour, $38,000/ minute. Yes, that’s right. Every minute, this company makes $38,000.
Can you see $20 billion cash from operation? After some capital expenditures it made $19.5 billion of free cash in 2015. (source:Google)
The company does not even know what to do with all the cash it made. Prudently, the company realized that their own stocks are traded extremely cheaply, it bought back about $23 billion worth of its own stocks last 2 years. They even borrowed about $10 billion to accelerate the buybacks. Crazy…. right?
Look at the EPS and Free Cash Flow per share. If the future results are similar to 2015’s then I can get my money back in about 7 years. Not bad huh?
(source: morningstar)
It has some long term debt and increased its long term debt over the year but the total amount is only $20,000,000,000. Did I say only $20,000,000,000?
Well, if you think about it, it is not too bad. It can pay back the entire long term debt within a year only from its free cash flow. Amazing.
(source:google)
What about other metrics?
Well. ROE is about 100%.
Yes…. I said it right.
100%…
What do you get when you invest in bank? 0.5- 1% annually in a saving account now? If you were a common stock holder of this company in 2015, technically, this company just made you 100% of your original investment within a year.
(source:morningstar)
Here are other factors that give me more comforts.
Price to sales ratio shows that the stock is currently priced at only 3.4 times of its sales whereas its 5 year average was 6.4 and other biotech average is 13.
(source:Thompson Reuters)
Trailing PE ratio also shows that the stock is being traded at 7.1 times of its earning whereas its 5 year average is 20 times and other Biotech average is 32.5 times. Seems like a good deal to me.
(source:Thompson Reuters)
Analysts target price is around $111 which is also nice as well.
(source:Thompson Reuters)
You gotta be thinking that this is just too good to be true? and the answer is yes.
There are some headwinds to note.
- Some adverse side effects were discovered from clinical trials on blood cancer drug Zydelig.
- The chief of cancer research left the company in early 2016.
- Merck’s lawsuit on patents infringement over Harvoni and Sovaldi.
- US politicians are all going nuts and having a heyday over Biotech and Pharmaceutical companies over their drug pricing.
But I think most of them are short term, non-recurring or recurring every once in a decade things.
I bought 81 shares of GILD at $85.24 on May 11, 2016.
The purchase will add $152 to my annual dividend income. That’s at least $13 passive monthly income that will be given to me year after year. Highly likely $13 will get bigger as time goes by. What a life! We will keep buying when opportunities are out there in the market. As you may know, it did not take too long to build my portfolio. When I started this blog (a year ago), our net worth was around 80K (excluding my car) and that only provided us less than $2,000 of annualized dividend income. However, now it provides predictable $7,500 of annualized dividend income per year and that number will always go up. Amazing huh?
As I mentioned several times, building your dividend portfolio isn’t very difficult. See the following links for excellent ways to save money and invest.
- 30 most important tips to be a millionaire no matter how much you make.
- Renting vs Buying
- 16 most important tips to save on car insurance by 40-60%
- Norbert’s Gambit- Save thousands of dollar from foreign exchange conversion fees
- What’s in my wallet
- Needs vs Wants
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Check out my portfolio page to see what stocks I own and the following article for more investment tips-How to Simply Invest and Get Richer for Dummies in 8 Easy Steps.
If you are also a dividend investor like me, then you should check out the following page to see how other dividend investors are doing. You won’t regret a moment of reading their valuable and inspirational articles. The Blogroll
I hope my recent buy updates inspire anyone who is dreaming of becoming financially independent. I am not there yet but I am happy to share where I am and where I will be headed along the journey to be a millionaire thus financially more independent. Don’t dream on winning lottery or a jackpot from your local casino. That’s not going to happen to you.
Dream on something that is so real that you can catch it after executing easy passive income strategies. It is not going to take very long to see the results and I am sure you can do it as well. All you need is a strong commitment for your future. Start your first step right now and come along for the million-dollar journey. Hang in there because your loved ones got your back (and I do as well) 🙂
Thanks for sharing BSR. I really like this company as it’s undervalued right now. It’s nice to be a long term shareholder with you. Let’s keep it up and congrats on the additional income. Just love it!
Cheers buds.
Yeah, I agree. This company has been hated for a while and of course that’s when I jump in. Such a great cash cow for almost nothing. I wish it goes down further so that I can double down! 🙂
Nice buy. I have GILD and AMGN on my watch list but still do not own either. I think those are the only pure biotechs I’d ever consider for my portfolio. Both have come down quite a bit from their highs and do look compelling. Thanks for sharing your new pick up.
I know what you mean DivHut. I like AMGN as well but GILD’s metrics are so strong that I could not resist it. I will hold it for a long time until I have a reason not to. Thanks for stopping by!
BSR
Hi BeSmartRich. I’m very long GILD and have been for sometime. I picked this as my winner stock for the year. Right now it’s not winner but we all are, because we get to buy shares of an amazing company at a serious discount. Great job buying GILD stock.
Thank you. Great to be a fellow shareholder. It is a cash generating machine that very hard for me to ignore. The stock has been hated for a while which is a great time for me to buy. There may be some more headwinds but from a long term perspective, this is a great stock to own. Thanks for stopping by!
Cheers!
BeSmartRich
Looks like a good buy to me. SOlid metrics over the year and some of the growth in key metrics over the last few years is impressive. The company also has a microscopic payout ratio as well, so hopefully they will use some of the extra cash laying around to increase their dividend and give you a nice boost. The company has some critical drugs for an population that is getting older and older each passing year.
Congrats on adding the income to your portfolio!
Bert
I agree. I think GILD is an undervalued cash cow. They don’t even know what to do with the money. They have been buying back shares which is great but if they can reinvest the cash and bring even more returns then I would not mind not getting more dividend from them. I will hold this for a couple of years unless fundamentals of GILD changes. Thanks for stopping by Dividend Diplomats!
Cheers!
BeSmartRich