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).

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.

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

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.

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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