Gilead Sciences, Inc. (GILD), Celgene Corporation (CELG): Have You Considered Biotech Yet?

Earnings guidance for the full year was raised 4.5% to $5.80 to $5.90 per diluted share. While shares have run significantly higher already this year, things don’t look too expensive for the late investor. A PEG ratio of 1.09 gives me the impression the company’s growth potential still hasn’t been fully accounted for in comparison to others within the sector. If you consider analysts’ estimated 20% growth next year, the forward earnings multiple of 25 times isn’t outlandish by any means.

The fund play

I always like to include an exchange traded fund alternative when discussing volatile sectors such as biotechnology. In this case, I would strongly recommend investors choose the iShares NASDAQ Biotechnology Index (ETF) (NASDAQ:IBB), which provides exposure to many of the top biotechnology firms. The fund’s top three holdings are Amgen, Inc. (NASDAQ:AMGN), Gilead, and Celgene Corporation (NASDAQ:CELG), all of which have at least a 7.73% weighting within the fund. Yes, you’re going to be paying 0.48% in fees, but this number is fairly low considering the commissions you would be paying if buying shares separately.

Conclusion

While biotechnology has performed exceptionally well already this year, Gilead and Celgene Corporation (NASDAQ:CELG) don’t look expensive in comparison to the rest of the high growth market. Both companies have decent productive pipelines and a bright future. I would suggest using broad market weakness to start positions in these companies if you have missed the run up until this point. If you do want to buy in today, I would recommend choosing the iShares fund mentioned above as it will easily diversify you across the entire sector while giving you exposure to both Gilead and Celgene Corporation (NASDAQ:CELG).

The article Have You Considered Biotech Yet? originally appeared on Fool.com and is written by Nathaniel Matherson.

Nathaniel Matherson has no position in any stocks mentioned. The Motley Fool recommends Celgene and Gilead Sciences. Nathaniel is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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