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Gilead's Shot in the Arm

Todd Wenning, CFA

Todd Wenning: One of the key tenants of our stewardship methodology here at Morningstar is capital allocation. And we want to see CEOs that do a very, very good job of allocating capital for the benefit of shareholder value.

Gilead Sciences' (GILD) CEO John Martin has done a fantastic job doing this since 1996. Since he took over the role in that year, the stock is up more than 100-fold. As a result of Gilead's strong capital-allocation strategy, one of the acquisitions that they have made in recent years that has done very, very well for shareholders is the 2012 acquisition of Pharmasset.

Senior analyst Karen Andersen, who covers Gilead full time, thought this was a very strong acquisition. She thinks that the company's return on invested capital could reach the mid-20% range again by 2018. So, we are very excited to have John Martin as a CEO of the Year finalist for 2014.