One might guess that there is speculation about the current biosimilar legal case; however, other players in the field are not moving. This is surging on moderate volume, so little of the fairly substantial short position has been covered yet. Which suggests that it could go still higher.
There is a note on my Schwab bulletin board which posits that the Evercore ISI biotech analyst, Mark Schoenebaum, had put out a note which called attention to some reimbursement rules proposed by the Centers for Medicare and Medicais Services which would be very favorable to biosimilars. However, this should lift all of the biosimilar stocks, and I see no sign of this.
I was posting at noontime ET, when the stock had traded only about 200,000 shares and was at 34. In retrospect, you would have to conclude that many shorts got frightened into covering as it repeatedly threatened to go past 35.
I sold my last shares of GILD slightly above 100. My theory - and theories are always dangerous - was that it was transitioning from a growth stock to a value stock and that it would take a few months to find new sponsorship, probably sinking to the mid-90's in the interim. I had a vague plan that I would buy back some shares in June, but that it would never again be a major part of my portfolio. Now that the stock has run up above 120 and subsequently sold off quite a bit, it's interesting to look at exactly where the biotechs have been going during recent months.
The IBB made an interim high of 375 on 3/20. It only bounced above that level on 6/22-23, one day ahead of GILD making a high of 123.37. The IBB closed at 372.80 Friday, suggesting that the biotech market has been basically flat for the past 3 1/2 months; but the reality is much different: Since 3/20, 4 of the 6 major components of the IBB have dropped rather sharply: Amgen is - 10.7%, CELG - 8.3%, BIIB -19.4%, and VRTX -10%. REGN, thanks to recent strength, is +7%. And GILD, despite the recent selloff, is still +10.7%.
Apparently, the strong cash flow of GILD made it much more attractive than the other major biotechs.
This begs the question, ..If the IBB is basically flat since 3/20 and the major components have been weak, is it being supported by strong returns from the smaller companies? Probably. At 3/20, I only had stakes in two larger biotechs, MDVN and INCY. MDVN is off 22% since then. Fortunately, I listened to the Credit-Suisse analyst and sold out when it was only off 12%. I still have INCY, which is +9.4% since 3/20. Among the 16 smaller biotechs I hold, 8 are up and 8 are down. The strongest of these have been HZNP (+53%) and DBVT (+47%) and the weakest IRWD (-32.7%) and OTIC (-40%). Obviously, if one had made a large bet on one of the winners here, returns could have been wonderful..However, my point is that in terms of the major biotechs, GILD has been the winner.
XBI is a catchall of smaller biotechs (Radius, @ 1.3% of their portfolio, is their largest holding). Since 3/20, it is up about 7%, which would tend to confirm my observation about the recent outperformance of smaller biotechs. So perhaps you are correct in preferring it as an investment. IBB, however trades about 3X the daily dollar volume and attempts to capture the overall performance of the biotech industry. Therefore, I think, it's a much more relevant guage of GILD's performance.
If you bought during the Ebola scare, at this point you have a gain of almost 14 points ... which is, as of yet, untaxed. If you wait until the end of October, this gain will be taxed as long term -- which could be anywhere from 0 - 30%, depending on your tax bracket. Even if you intend to lighten up your position, the stock would have to fall a good deal to make selling before November worthwhile.
And, as long as you're waiting until November, why not wait until 2016 and push your tax bill out another year? Of course, the ideal is to hold the stock and let your gains compound. (No reason why this stock can't go to 60, I believe.)
Excellent call, vision_316. We should all remember that the only people who have to buy soon after strong earnings are the shorts. Institutions don't pile into the stock immediately. They bide their time and add to their positions incrementally. As for the longs who expected a quick runup and sold, sometimes you just have to realize that good earnings are good earnings. The dip, which was explained as due to "lowered projections" was really due to their own naïve expectations.
But Stan, you were obviously invested in the 110 puts (viz your July 10 post "headed below $110" and your earlier prediction of $107.50.) In fact, the positions in both 110 and 115 puts for tomorrow was substantial and is now worthless. Yes, given the large position in 120 calls, it's unlikely that this level will be breached tomorrow. Even so, you could have made some serious money buying them when you were throwing your money away on those puts. In fact, it was folly to short any of the biotech stocks over recent weeks.
Sentiment, as expressed by the options, is not worth much. It depends on who is holding the positions. At expiration last month, GILD surprised a lot of people - including myself - by marching up through 120. If those 120 calls are in the hands of hedge funds, say, instead of hopeful retail investors, this could easily break 120 tomorrow. In spite of Stan's seemingly safe prediction. (You didn't short those calls, did you, Stan?)
This makes your July 10 prediction of "headed below $110" look disingenuous. Of course, there is always the possibility that you just make stuff up.
Oh, excuse me - you were predicting sub $110 for GILD. If you did, indeed, hold those CELG 120's, we will have to ascribe that to The Blind Squirrel Theorem. Unless, of course, you had inside knowledge of the Receptos acquisition. In which case - given all of the wonderful advice you've dispensed here - it seems callous of you not to share it.
All that's necessary for airline stocks to rally, it seems, is for oil to continue to fall while the dollar falls, too. This is, or course, extremely unlikely. So ultimately, we will be dependent on earnings, which is fine by me.
As it moved up to 13.30, I raised my stop to 113.15 and went to lunch. When I got back, was surprised to find that it was taken out. I had tried to fish for a bottom at 113.60 earlier in the day, and lost heart at 113.10. This was sold relentlessly all day. Perhaps someone who was in commodities had a margin call. The only stock I can see in my portfolio with a strong bounce was FB.
UAL sold off 3 1/3 points yesterday on strong earnings, but held up well in today's airline debacle. I had several buy orders in for AAL between 40.08 and 40.48, and when I came back from lunch, found that they had filled. Hoping that this can bounce Monday.