With the COVID-19 pandemic wreaking havoc in financial markets, investors want to buy shares of companies with solid underlying businesses that can survive or even profit from downturns -- especially those that have proven themselves before.
If you had invested $1,000 in shares of biotech giant Gilead Sciences (GILD -2.70%) before the Great Recession in 2008, your investment would have grown to $2,849 as of July 13. However, that's just accounting for capital appreciation of 185%. If we were to include Gilead's dividend yield of between 2% and 3.6% per year, then the final amount would be even higher, at $3,278.31. Gilead bested the S&P 500's capital gain of 155% during the same period.
Since this year's recession began, Gilead has beat the S&P 500 once again, returning 18% year to date compared with the index's decline of 1%. Today, let's look at why Gilead is a top recession-proof stock pick for investors.
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A solid underlying business
Gilead is currently worth $105.8 billion in market capitalization, has 12,000 employees, and operates in 35 countries spanning six continents. The company is an industry leader in treating viral and inflammatory diseases, as well as hematology-oncology. Gilead's success stems from its commitment to research and development spending, which amounted to over $9 billion last year. In the past three years, Gilead has allocated nearly $14 billion to the search for new therapies.
In Q1 2020, Gilead's HIV portfolio grew by 14% compared to last year, representing the eighth consecutive quarter of double-digit revenue growth. The company's HIV treatment drug, Biktarvy, is now the No. 1 prescribed HIV regimen in the U.S. Its HIV prevention drug, Descovy, now commands 38% market share.
Gilead also has significant resilience in its hepatitis C portfolio. Previously, revenue in this area had declined dramatically due to patent expiration. However, with the launch of the company's own authorized generics, Gilead has regained up to 61% market share in this sector. The company is now launching a new venture developing the next generation of therapies in immuno-oncology.
With 48 clinical programs, 16 late-stage candidates, and four breakthrough therapy designations, Gilead has ample candidates in its pipelines to continue growing its revenue for investors. The company may soon receive an even bigger boost to its bottom line.
Why Gilead will continue to grow
In Q1 2020, Gilead recognized $5.5 billion in revenue and $1.68 in earnings per share, which was a small increase from the $5.3 billion and $1.67 in earnings per share the year before. At an annualized EPS rate of $6.72, this means Gilead is trading at just 12 times forward earnings -- and may get even cheaper from a new growth opportunity.
The Trump administration gobbled up Gilead's new COVID-19 treatment, Remdesivir, with 500,000 vials purchased within days. The purchase generated more than $195 million in revenue for Gilead in just a month. With a sound core business, skyrocketing catalysts, and a healthy dividend, I believe Gilead is a great biotech stock to add to investors' portfolios.
