Gilead Shines

Biotechnology can be a great place to make a fortune or lose a bundle. Gilead Sciences (NASDAQ:GILD) may be a way to make money. One strategy for the average do-it-yourself investor is to pick a company that produces drugs you can really understand. Gilead makes Viread and Emtriva for HIV, Hepsera for hepatitis B, and Tamiflu for influenza, among others. Most people can grasp those types of drugs. Another plus for Gilead is that the Food and Drug Administration seems interested in making it easier for certain companies to go through the drug approval process faster.

It can also be helpful for investors to listen to what the market is saying about a stock. Over the last five years, Gilead has trounced the biotech sector. The market clearly thinks good things will come for Gilead. Compare this with another popular biotech company, Human GenomeSciences (NASDAQ:HGSI). A snapshot of this company tells a very exciting story, yet the stock has performed poorly. While it is difficult for most investors to understand what is wrong with Human Genome, the market is clearly saying to stay away. While this type of message from the market can be wrong, it's good enough for me.

Gilead has had very solid growth that looks to continue for the foreseeable future. Earnings for this fiscal year are estimated to be $1.50, growing to $1.98 next year. The Street is looking for revenue to be $1.18 billion this year and $1.48 billion next year. Gilead's revenue growth, profit margins, and return on equity are outstanding compared with the rest of the biotech group.

One fundamental hiccup has been a fair bit of insider selling. While the selling has not been extreme, CEO John Martin has been a steady seller every three months when his window opens.

The biggest threat to Gilead, or any other biotech for that matter, would be a negative FDA ruling on a drug in its pipeline. The biotech sector is littered with great concepts that have failed. This is a tough sector to own for most people. It is crucial to know that while it is possible to put the odds in your favor, just about any stock in the group can take a 20% hit on bad news.

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Fool contributor Roger Nusbaum is an investment manager and wildland firefighter in Prescott, Ariz. At press time, neither he nor his clients owned shares in Gilead.