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Turning Bullish On Gilead - Bezek's Daily Briefing


Stocks are down on Tuesday..

Biotechs, recent IPOs, and an Alcoa earnings miss are among the causes..

In the selloff, is Gilead becoming an opportunity?.

Markets are slumping on Tuesday. While it's not precisely clear what set off the selling, several factors appear to be weighing on the market.

First off, the recent tech IPOs are floundering. Twillio (NYSE:TWLO) shares in particular got whacked for a 15% hit yesterday. Other high-flyers, including Acacia Communications (NASDAQ:ACIA) dropped in sympathy, and the panic spread to this month's IPOs, with Nutanix (NASDAQ:NTNX) and Coupa (Pending:COUP) getting clocked. And most of those shares continue to spiral further down again today.

IPOs are worth watching, since they are one of the market's more speculative outlets for capital. When people are feeling good - like they were two weeks ago - stocks like Nutanix soar. And when the tide turns, these stocks are the first to get wantonly dumped. I was watching Twilio nosedive yesterday and thinking: "this probably isn't good for the broader market".

Sure enough, add in an earnings miss from Alcoa (NYSE:AA) and problems in biotech, and we've got ourselves a meaningful sell-off. Alcoa shares are off more than 10% today, and while the company is hardly an industrial bellwether anymore, it's still not an encouraging start to earnings season.

Biotech/Pharma also appears to be on a fading wave. Between the surge in Hillary's polling and several high-profile stock wipeouts including Alnylam (NASDAQ:ALNY), Bristol-Myers Squibb (NYSE:BMY), and now Illumina (NASDAQ:ILMN), and it's been a month where risk has come back to the center of the discussion for health care stocks. Illumina, an S&P 500 component and biotech mega-cap, is off more than 25% on an earnings warning.

But turns in investor sentiment bring opportunity. And Gilead (NASDAQ:GILD), after months of relentless selling, may finally be a real value for bargain shoppers.

Gilead: Getting Interesting

It's no secret I've been down on Gilead for quite awhile. With the stock at $120, just a couple bucks short of its all-time high, I called "sell" on Gilead in a contest-winning article that generated more than 300 comments, mostly negative. That's no surprise, in it, I specifically warned that many people were buying the stock despite not understanding the underlying business in much detail.

Like with Kinder Morgan (NYSE:KMI), there was a group of yield tourists that didn't like to hear that their investment was complicated. While many dividend growth investments are easy to wrap your hands around, biotech doesn't fit the same mold. Selling revolutionary drugs is a bit different than selling cereal or cell phone access. However, people saw that Gilead's...