Proponents of income investing may not like it, but there is nothing like a growth portfolio, portions of which can be sold at higher prices to rival the benefits of a dividend portfolio. Buying at lower prices is also an effective strategy for stocks such as Gilead Sciences, Inc. (NASDAQ:GILD), Oasis Petroleum Inc. (NYSE:OAS), and Interactive Brokers Group, Inc. (NASDAQ:IBKR) which offer excellent earnings potential. Here is a closer look at these companies.
Gilead Sciences, Inc. (NASDAQ:GILD) still going strong
Gilead Sciences, Inc. (NASDAQ:GILD) is a bio-pharmaceutical company that develops medicines for human immunodeficiency virus (HIV), liver diseases, such as hepatitis B and hepatitis C and cardiovascular and respiratory conditions. With a market capitalization of $37 billion, the stock is among the most heavily-traded securities, and thus it comes as something of a surprise that its price has doubled over the last 12 months.
This surge has been aided by strong earnings results and encouraging updates of its drug-development program. In its latest update, the company reported results from four phase III studies named Neutrino, Fission, Positron and Fusion. The studies used the drugs on patients suffering from various genotypes of the chronic hepatitis C virus.
In the quarter ended Dec. 31, the company reported a 17.7% jump in revenue but it was the surge in net profit from $665 million to $762.5 million which made the market players buy this stock aggressively.
It has advanced 37% so far in 2013 and still trades at a forward price-to-earnings ratio of 17.6. Strong earnings visibility and a simplified capital structure are some of the factors that make analysts rate the stock as ‘Buy’ or ‘Outperform.’
Oil – Down but not out
Another attractive area to look for bargains is oil and gas exploration and production where stocks have lately taken a beating following the drop in crude-oil prices. Texas-based Oasis Petroleum Inc. (NYSE:OAS) is an exploration and production company focused on shale resources in the Montana and North Dakota regions of the Williston Basin.
The stock has dropped 11% over the month and now trades at attractive earnings multiples of 21 and 10.6 on a trailing 12-months and forward basis, respectively.
The forward-earnings multiple of 10.6 may not be foolproof, as this is evidently based on high oil-price expectations, but a low debt-to-equity ratio of 1.5 (going by the standards in the sector) offers some cushion to future earnings. This capital structure appears simple considering the fact that the company has grown its top line from $37 million in 2009 to $686.7 million in 2012. Profits have also grown in a linear fashion, and so far its trajectory looks uninterrupted.