The Alpha Algorithm Goes Back Into Biotech

Nicholas Vardy

Nicholas Vardy has a unique background that has proven his knack for making money in different markets around the world.

This week’s Alpha Algorithm recommendation returns you to a sector that has been out of favor over the past 12 months with biotech giant Gilead Sciences Inc. (GILD).

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Founded in 1987 and headquartered in Foster City, California, Gilead Sciences, Inc. is an independent biotech company that has a broad-based focus on developing and marketing drugs to treat patients with infectious diseases, including viral infections, fungal infections and bacterial infections. The company also has a specialized focus on cancer.

Gilead Sciences Inc. (GILD) versus the S&P 500 over the last three months.

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10 Top Investment Strategies Betting on Gilead Sciences Inc. (GILD)

1. Goldman Sachs Hedge Fund Index

The stock is part of the Goldman Sachs Hedge Industry Index, which tracks an equal-weighted index of the 50 most-frequently held U.S. companies selected from the portfolios of hedge funds.

2. Large-Cap Alpha Core

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The stock is one of a tiered, equal-weighted index of large-cap stocks selected from the S&P 500 expected to outperform the broader large-cap space based on an intricate methodology of ranking stocks according to their recent performance.

3. Goldman Sachs’ Active Beta

The stock is selected according to four factors — value, quality, momentum and low volatility. These, in turn, are based on criteria including book value, sales and cash flow scaled by share price, profit/assets or return on equity (ROE), risk-adjusted returns and daily standard deviation of returns.

4. Morningstar’s Moat

This stock is included in a strategy that tracks an equal-weighted index of 20 companies that Morningstar determines to have the highest fair value among firms with a sustainable competitive advantage or “moat.”

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5. Market Legends’ Pick

Stock is part of a strategy that replicates methods of a handful of legendary investors using 20-plus models built on fundamental valuation metrics, rather than technical factors.

6. Deep Value

This strategy tracks an index of 20 stocks selected from the S&P 500. It identifies undervalued stocks using proprietary quality screens — positive earnings, dividends, etc. — and valuation metrics like enterprise value to earnings before interest, taxes, depreciation and amortization (EBITDA).

7. Value Tilt

Selected using a multi-factor modeling approach, the company is a value stock designed to enhance portfolio risk/return characteristics.

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8. Share Buybacks

The company’s outstanding shares have been reduced by at least 5% in the previous year through share repurchases.

9. Insider and Analyst Sentiment

One of 100 stocks chosen from the S&P 1,500 based on positive sentiment among those “insiders” closest to a company’s financials and business prospects, such as top management, directors, large institutional holders and the Wall Street research analysts who follow the company.

10. High-Quality Stock

The stock exhibits positive fundamentals, including high return on equity, stable year-over-year earnings growth and financial leverage.

Recommendation

Buy Gilead Sciences Inc.(GILD) at market today and place your stop at $68.50.

If you want to play the options, I recommend the GILD November $72.50 calls (GILD171117C00072500), which last traded for $3.59 and expire on Nov. 17.

Portfolio Update

Sincerely,

Nicholas Vardy

Nicholas A. Vardy

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