Value stocks should arguably form the basis of any well-rounded retirement portfolio. However, it’s not always easy to identify stocks that are currently trading at discounts relative to their peers that can ultimately stand the test of time.
Keeping this theme in mind, we turned to three of our contributors to ask for their thoughts on the matter. They suggested that Gilead Sciences (NASDAQ:GILD), Amgen (NASDAQ:AMGN), and General Motors (NYSE:GM)might all be undervalued stocks at the moment that can produce substantial returns over the long term — making them perfect value stocks for a retirement portfolio. Read on to find out why.
This top biotech is down but not out
George Budwell (Gilead Sciences): Among biotechs, Gilead is easily the most undervalued name in the space. At a price to sales ratio of 3.0 and a forward price to earnings ratio of 6.9, after all, there simply isn’t a cheaper large-cap biotech stock in existence.
Truth be told, though, this rock-bottom valuation is the by-product of the company’s weakening hepatitis C drug sales — combined with the growing fear that generic HIV medicines will cut into Gilead’s other major franchise, starting perhaps as early as next year.
Putting the doom and gloom aside for the moment, Gilead is arguably still a tremendous bargain — even for risk-adverse investors, and despite these ongoing headwinds.
The heart of the matter is that Gilead’s diverse and robust clinical pipeline is being valued at pretty much nothing by the market right now, and that’s bordering on the absurd based on the commercial prospects of the company’s clinical portfolio.
At present, Gilead sports assets for high-value indications such as nonalcoholic steatohepatitis and rheumatoid arthritis, along with a host of anti-cancer agents in early to mid-stage development. In short, the company’s pipeline could end up producing multiple blockbuster drugs over the next four to five years.
In addition to a bearish reaction to Gilead’s hep C franchise, the market has taken such a pessimistic stance toward Gilead’s pipeline because of the company’s setbacks in oncology. But the past is rarely prologue in the world of clinical trials — meaning that the market’s dire outlook toward Gilead’s pipeline is probably wholly unjustified.
All things considered, Gilead offers an enormous amount of under-appreciated deep value that makes it a far safer bet than the market is giving it credit for right now.
A healthy addition to your retirement portfolio
Dan Caplinger (Amgen): Biotechnology stocks might not seem like the most obvious choice for conservative investors, but the biotech industry…