Were we right to ditch our GSK shares?
The past two weeks have been hair-raising for global investors. Global share prices plunged after President Trump revealed the largest tariffs on US imports since 1930. The UK FTSE 100 and US S&P 500 both dived, and the tech-heavy Nasdaq Composite index was the hardest hit. With asset prices slumping, maybe it’s finally time for me to buy more GSK (LSE: GSK) shares?
GSK takes a tumble
At its 52-week peak on 16 May 2024, the GSK share price hit 1,823.5p, but it’s been mostly downhill ever since. Last week, as stock markets crashed, GSK shares collapsed to 1,242.5p on Wednesday 9 April. This took this FTSE 100 stock back to levels last seen in early 2021, during the Covid-19 crisis.
Also, GSK shares have been limping along for years. They’ve lost 12.8% of their value in a month, while declining 11.8% over six months. Over one year, they are down almost a fifth (-19.8%), while their five-year return is -21.5% (all returns exclude cash dividends).
GSK was our big deal
Until four years ago, GSK stock was my family’s biggest shareholding. By spring 2021, we’d been shareholders of this UK biopharma giant for over three decades. This happened because my wife joined this Footsie firm in late 1989.
As an employee of a global multinational, my wife took maximum advantage of all share schemes open to GSK employees. These included Sharesave (Save As You Earn/SAYE/Savings-Related Share Option Scheme), Share Reward (Share Incentive Plan, ‘buy one, get one free’), Company Share Option Plans (CSOPs), Long-Term Incentive Plans (LTIPs), and share-based performance bonuses.
What amazes me is that my better half never bought any GSK shares via the London Stock Exchange. Instead, her shares were either free, cheaper than half-price, or bought at steep discounts to market prices. In short, every part of this shareholding was bought ‘on the cheap’.
Sell block
After more than three decades with GSK, my wife left the group in early 2021. This triggered a generous benefits package, including enhanced redundancy and upgraded immediate retirement. But what proved highly attractive was her employer’s offer to pay all taxes and costs on her share sales on departure.
When UK shareholders sell stocks at a profit, capital gains tax (CGT) may be payable. The higher CGT rate has been as much as 40% in previous decades, but was 20% for higher-rate taxpayers in the 2021-22 tax year. (This rate rose to 24% from the 2024-25 tax year.)
Having owned many of her shares for decades, selling free of CGT and dealing costs was a lucrative offer for my wife. Hence, she liquidated all but a tiny percentage of her GSK holding, dramatically boosting her net gains. Today, we both own small legacy stakes in GSK, but nothing like the lump we once had.
GSK looks undervalued to me
With the GSK share price at 1,317.5p today, the group is valued at £54.3bn. This stock trades on 21.2 times earnings and offers a market-beating dividend yield of 4.6% a year. These fundamentals look undemanding to me, so we shall keep our rump holding in GSK. Though we were absolutely right to sell big in 2021, I’m seriously thinking about buying more GSK shares at current prices, cash permitting!
The post Were we right to ditch our GSK shares? appeared first on The Motley Fool UK.
Like buying £1 for 31p
This seems ridiculous, but we almost never see shares looking this cheap. Yet this Share Advisor pick has a price/book ratio of 0.31. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 31p they invest!
Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.
What’s more, it currently boasts a stellar dividend yield of around 10%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?
More reading
- 3 FTSE stocks Fools are eyeing up for choppy markets
- I asked ChatGPT which FTSE 100 stocks are screaming buys for Trump’s tariff war. Here’s what it said
- GSK’s share price looks a steal to me anywhere below £43.29, and here’s why
- Should I buy GSK shares at £15?
- Is magic suddenly happening to the dirt cheap GSK share price?
The Motley Fool UK has recommended GSK. Cliff D’Arcy owns GSK shares. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services, such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool, we believe that considering a diverse range of insights makes us better investors.
