Mark To Model

Deutsche Bank initiated Gilead at Buy and Amgen at Hold. I hold both stocks although my position in Gilead is significantly larger. The analyst put a $42 price target on GILD and a $57 price target on AMGN using a discounted cash flow analysis.

For some odd reason the analyst used an 8.5% discount rate on Gilead and a 9.4% discount rate on Amgen even though Amgen is the larger company with a more diversified revenue stream. This is a glaring inconsistency where the analyst tweaks his/her spreadsheet in order to back their view. I find most analysts do this.

10 comments:

pavel said...

tsachy, you dont follow any small pharma companies?
just bought some lucky lotto - LTUS, china company, guiding 40 cents EPS in 2010, current stock price 1.12 usd.

Tsachy Mishal said...

I dont buy bulletin board stocks or Chinese stocks so this one is a double whammy. i believe they are two specialized areas where I do not have any expertise.

Anonymous said...

Analysts and sector investors all think Gilead is absurdly underpriced. But the stock continues to languish. SOmehow investors are panicking about GILD's patent expirations in 2017 and 2021 but completely sanguine about NFLX's streaming video prospects.

Tsachy Mishal said...

It seems to me analysts are turning negative on Gilead. Most of the recent notes have a very negative tone. I believe thats a good thing.

Gilead has relatively outperformed the market since earnings. I believe that trend will continue.

pavel said...

just one question, why? i know the risk much higher, but with the amount of work you put anyway, you could make more....or loose more if you are wrong

Tsachy Mishal said...

I believe there is a lot of corruption in China due to the government having its hand in everything. The people on the ground over there have an edge on me that i will never be able to overcome.

Additionally, There is not enough liquidity in the stocks for me to build a meaningful position and to get out when I want to.

Anonymous said...

I came from China long ago and I don't feel too easy to trade small chinese stocks. I know my cousin lost his shirt doing that while he is actually living there. I suspect there could be a lot of insider tradings over there.

Anonymous said...

Tsachy, when PFE finally turned corner recently I got too comfortable with it without unloading some of my shares. Now it turns back down from $16.50 to as low as under $16, I wonder what is your outlook on this name? Thanks. I never learned to trade options or feeling confident to get to that.

Tsachy Mishal said...

You did receive another dividend in Pfizer so that is part of the reason why the stock has come down. I prefer Gilead to Pfizer. I had Pfizer in my retirement account and now that Pfizer has bounced back I switched to Gilead.

Anonymous said...

Thank you Tsachy. I will look in to Gilead. I bought most of my PFE shares over $19 so I am still hoping to recover more before selling them. But maybe not much upside anytime soon.