Thoughts on GSK

theshortstack

Afternoon all,

I've had GSK on my watchlist for the last couple of months as a potential 'safe' investment into a large Blue Chip with a good yield.

The price has completely dived though and seems to be going down further - in fact, it's now at pretty much its lowest ebb over the last 12 months, which I guess must mean that there is a danger to the increasing dividend.

So does this make it a good time to buy or one to put on the hold list for a while?

Scarpacci

The Chinese bribery scandal is definitely putting a damper of the shares of late. There's uncertainty surrounding that and its effects on the company, which depending on your view is either a sell sign or a big buy sign. Uncertainty is often the friend of the patient investor. China is not a very big market for GSK right now, so the direct effect on profits and thus the dividend is likely to be minimal to non-existent. What action the authorities in China take is a bigger concern and could have an effect not just on profits now with fines, but also the firm's ability to grow in China in the future - a key growth market for pharma.

There is still the problem of wider reputational damage, since GSK in other countries has also been mired in ethics problems. Then the final problem, all stemming from that, is the Serious Fraud Office and the US authorities, who take a hard line on bribery. If there's a suggestion this is part of a wider culture of dishonesty at GSK, the firm could be looking at large fines. There's a lot of unkowns which are depressing the shares.

The actual pharma business continues to look strong and, in my view, likely undervalued. GSK has already been through the fall off the patent cliff and seems to have a stronger pipeline than AZN, which in my view is still being bouyed by the take-over talk from Pfizer and looks frothy. One of Glaxo's key drugs, Adavair, is off patent but still delivering large numbers for GSK the U.S., where there isn't generic competition yet. When generic competition finally comes that will impact GSK's earning, but that will have been factored into the share price already. Announced earlier this year, GSK is part of a deal with Novartis that will see GSK sell off its oncology assets in return for Novartis' vaccines business, where GSK is stronger, and form a partnership for a consumer healthcare company with GSK being the controlling partner. The company will be much more focused on areas where it can be a market leader, which should deliver value for shareholders.

In my view, GSK is a buy. I hold GSK and have topped up in the last few months, though not quite at these levels. I'm really at the point where I can't buy any more GSK now, but if I could I would personally be buying right now. My word of caution before you buy, would be to be sure whether you'll be able to stomach any pain that might come GSK's way as a result of the China bribery scandal. I don't have a crystal ball but it seems clear some amount of fines and legal punishment are on the horizon. I don't think it will have a debilitating effect on GSK and I think the markets tend to overreact to this sort of gloomy backdrop, but I would caution there's likely more bad news on the way - though who knows whether it's as bad as share price might reflect.

BLB53

Echo all above.

I am a long term holder of GSK for income. I would say, now is as good a time as any over the past year to pick up the shares assuming you are intending to hold long term. Of course, in the short term, the share price may drop further but it is impossible to time the buying and/or selling of shares.

ChesterDog

I used to be closely associated with GSK through my work.

It is a ruthless, aggressive, opposition-crushing, money-making machine. Nothing gets in its way.

You can expect the odd bump in the road, as with any investment, but it will be making vast amounts of money long after we have all eaten our last dog biscuit.

bigadaj

ChesterDog wrote: »

I used to be closely associated with GSK through my work.

It is a ruthless, aggressive, opposition-crushing, money-making machine. Nothing gets in its way.

You can expect the odd bump in the road, as with any investment, but it will be making vast amounts of money long after we have all eaten our last dog biscuit.

Animal testing?

atush

I dont think being down 3.5% is a huge fall YTD.

I have a holding and I am keeping it. If it falls further, i'll buy more.

planteria

ChesterDog wrote: »

It is a ruthless, aggressive, opposition-crushing, money-making machine. Nothing gets in its way.

which can be taken very negatively, or very much a "jump on board and back this winner":D

i am holding Glaxo and will probably increase my holding during the coming weeks/months.