Market Analysis by covering: Gilead Sciences Inc, BlackRock Health Sciences Trust II. Read 's Market Analysis on Investing.com
Oil extends move higher on concerns over Strait of Hormuz; more supply coming?Our play? As always, we’re going where first-level investors aren’t, quietly snapping up dividends AI is set to supercharge.
, which are about to see the value of their R&D dollars get a big boost from AI. We’re going to tap in with an 8.8%-yielding closed-end fund that’s trading for 11.4% below its “true” value. That discount exists in part because investors—worried about how AI may disrupt sectors like software—are ignoring pharma, and the accelerated product cycles AI is about to unleash here.2026 is the first commercial year of “applied AI”—where AI moves past the hype stage and starts showing up in margins, product cycles and cash flows.of that in software stocks, which have taken a beating as tools like Claude Code let more people make their own apps. The pullback has taken a chunk out of logistics companies and IT-security firms, too.As you may already know, once a drug is developed, it moves through Phase I, II and III testing before being approved by the FDA. It can fail anytime in that process, sending researchers back to square 1—and wiping out every dollar spent on R&D to that point. Enter AI, which can let scientists crank out new drugs faster and, most important, let these experimental treatments flunk out in a cheap computer simulation, not halfway through a Phase III trial. Historically, it has taken 10 to 15 years to develop a new drug. Every month matters because patents last only 20 years. The faster a company gets a drug to market, the more months and years it has to collect that competition-sheltered cash.But let’s be conservative: Even if AI cuts just two to four years off the process, that would still amount to a big sales boost for pharma companies., resulting in more drug candidates and approved medications. And by getting these drugs to market faster, these companies will have more time to monetize the winners. This, again, is the exact opposite of the software-stock panic. Which brings me back to that 11.4%-discounted CEF I mentioned off the top: theRight now, BMEZ offers up a sweet 8.8% payout. It’s returned a tidy 11% since we added it to our portfolio a little over a year ago, in December 2024. That’s not bad for a sector that’s been under pressure, first over concerns about RFK Jr. leading HHS, then over tariffs and the administration’s efforts to control drug prices. In light of that, the fund’s discount to net asset value has dropped from around 3% a year ago to 11.4% today.Gilead focuses on oncology and HIV treatments. It’s a beast in pharma, with a loaded pipeline: 25 treatments in Phase 1 trials, 13 in Phase 2 and 15 in Phase 3. The company is teeing up lots of shots on goal, in other words. Management knows what AI can do for it and is investing accordingly: Late last year, Gilead broke ground on a new 180,000-square-foot AI-enabled research center at its California HQ. The company is also building from a strong foundation on the financial front: Powered by growing revenue from its HIV and liver treatments, the stock has shot up 39% in the last year:The company is already a heavy R&D spender—to the tune of $5.7 billion, or 19% of revenue, in 2025. And now along comes AI.These latter two companies are good “pick-and-shovel” plays on more R&D spending and rising health spending overall. Which brings me back to that BMEZ discount. Rewind a year—before the tariff trauma and fears around RFK and drug prices—and this fund was trading at 3% below NAV. As of this writing, as I mentioned a second ago, that discount has nearly quadrupled—to 11.4%, even though the future looks a lot brighter now than it did back then. That makes no sense, and it’s a disconnect we’re happy to exploit.What’s more, if you look at the bottom-right side of that chart, you can see that BMEZ’s discount looks like it’s scratching bottom and starting to move up. That’s a great time to buy a CEF—when a discount is still wide but is steadily heading north. It’s an early indicator that a fund is starting to get attention. If today’s discount shrinks to the 3% level it held a year ago—likely, in my view—we’re looking at just under 10% price upside from the closing discount alone. Add in that 8.8% dividend and you’re looking at around 18% in gains and dividends here. Pretty sweet.the other wayBrett Owens and Michael Foster are contrarian income investors who look for undervalued stocks/funds across the U.S. markets. Click here to learn how to profit from their strategies in the latest report,"Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. 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