Wednesday, September 17, 2014

GlaxoSmithKline (GSK) and Gilead (GILD)

I remain optimistic about the stocks I invest in. I don't think the stock market is in a bubble, though a few select stocks are, but there are always a few stocks that are highly overvalued at any given time.

My article in Seeking Alpha, published today, is positive about both stocks:

Could GlaxoSmithKline Be A Better Investment than Gilead?

It does feel peculiar that Gilead Sciences has become such a large company in the past decade. But I can only think of one reason that Gilead is not already at $120 or even $140 per share: the vast amount of cash that would need to be invested to get it there. Rather than being in a bubble, in fact investors are rather restrained when it comes to the stock market. Despite federal bonds returning less than the rate of inflation, that is where the stupid money is. Stupid pension money, stupid 401k money. The foreign money in bonds may not be so stupid, given that some national bonds, for instance Germany's, return even lower rates.

Of course, if for some reason the U.S. economy should turn south later this year (perhaps a meteor will strike New York or Washington), markets will fall, and the doomsday specialists will say "I told you so."

I do believe the Federal debt is an overhang that will become an avalanche someday if taxes are not raised, and the earth's environment is in trouble, but those are long-term, not near-term problems for investors.

I currently own Gilead, but not GSK. Gilead is already over 10% of my portfolio, so I may sell some at any time, but my hope is to wait until it is at least $120 per share, and then sell as little as needed to bring it back in line with my portfolio guidelines.

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