This trade was actually executed on Tuesday 07/26/16. I didn’t get a chance to write about it until today.
As mentioned, I completed this trade on Tuesday 07/26, which was the day after GILD reported earnings. Shares were down over 9% at times during the day.
Obviously some people changed their investment thesis on GILD based on the latest earnings, but I haven’t.
GILD goes ex-dividend on Sept 14, and will continue to pay $0.47/share. GILD is a dividend initiator, having only started paying out last year. I expect two more quarters at this payout, and then probably another increase. Although they just started paying a dividend, they’ve settled into a nice pattern already.
This trade will expire before the next ex-dividend date, and is the equivalent of two quarters worth of dividend payouts.
SPL (Strike Price Logic)
GILD touched $78.25 the monday after Brexit and that’s as low as it’s been since 2014. Momentum is definitely slowing for the company’s flagship drug, Harvoni. I expect once the earnings blackout clears, management will start gobbling up shares if it stays this low.
This strike price represents a sub 8.0 P/E ratio, which is just retarded considering the company has a pretty healthy pipeline and a fortress of a balance sheet if acquisitions are needed.
I’ve already got more invested in GILD than I’d like, but sure, I’ll take more at $79. This would make it a completely full position if assigned.