mercredi 28 octobre 2015

Gilead and Apple

Gilead and Apple results were released yesterday and both results were pretty good. But Mr Market didn't seem to have an erection at all. Ok, maybe a small one with Apple, but jack shit with Gilead.

Me, I had an erection. I don't own shares of Apple anymore but it may very well be the case once again in the future.

To me, Apple and Gilead are very similar:

Two large caps, for which a few products count for a big part of the earnings. Both companies are full of cash (they both actually have much more money than a lot of countries) have a very high ROE, high EPS growth and small PE ratio because investors seem to believe that such high growth can't continue VS limited diversity of products sold.

The only big difference between the two is the sector (commodities VS healthcare).

I'm still amazed how much Gilead share price remains flat whatever the results look like. Holy fuck, the last results were so great and the price of the stock decreased by 2-3%. I can't believe it.

The last results of Apple were great too. This time however, the price of the stock raised by 3-4%, which is not bad. But it should have been much more in my opinion.

Let's take a look at important numbers:

Forward PE ratio: 11
ROE: 41
annual EPS growth last 5 years: 38%

Forward PE ratio : 9
ROE: 93
annual EPS growth last 5 years: 39%

If you analyze the results and read comments on seekingalpha, you can always find reasons to worry about any stock. You can even find some reasons to worry with companies like Apple and Gilead even if they have so much money that they could buy a medium or even a large cap tomorrow without raising any debt.

But come on, let's face it, it would be pretty hard to find companies for which you'll get such exceptional earnings for such a cheap price.

Maybe the two best examples out there of companies that should be part of any portfolio, particularly given the concept of a magic portfolio (Joel Greenblatt).

3 commentaires:

  1. I'm prepared to say Frances Horodelski may have just referenced your blog as one of her favorites in her morning newsletter.

  2. Just read it! I wonder if she really writes about me.

  3. Did you compare with Jazz Pharmaceutical ?