GlaxoSmithKline PLC (GSK)

He was concerned that GSK was getting more growth focused. They spun off their consumer products with Novartis, giving up their oncology department. Now they have a joint venture with Pfizer. Having it as a longterm asset is probably positive.

The cost of bringing a new drug to market hasn't changed, but the customer base has shrunk. Same costs, smaller revenue base. He likes healthcare for being recession-resistant, but he prefers a medical device company like Stryker.

Bristol Myers's latest drugs haven't done as well as they thought. GSK has refocused into pharmaceuticals, and they sold off the consumer products division. After 5 years, they have both come to be around the same price. He would prefer GSK.

Has pound risk, if there is a hard Brexit. The company is fine, and has a dividend yield of around 5%. Must look at whether they have a strong pipeline of drugs coming to market in the next 5 years. Would rather go with Roche or Bristol Myers instead.

He likes the volume recently, but expects resistance at $42. He was disappointed that the recent rally didn’t go higher. It has a good yield and looks like a Canadian bank where volatility is not too high. He would use $38.50 as a stop and would like to see it test $42 as an upper breakout target to buy more. Yield 5.2%.

Don't add to your holdings, just hold. Wait till June when the second generic test of a new drug gets passed by the FDA. They have a great HIV franchise. Their capital plans are really interesting, because they may buy Pfizer's consumer division, while Novartis has a sell option to sell back to GSK an earlier swap deal. They are focusing on consumer products. Dividend yield over 6%.

The pharma industry in the late-90s came out with social drugs like viagra, so the market awarded pharma big growth multiples. But then, these stocks came off. Problem is they were never really growth stocks and now the drug industry isn't coming out with new blockbuster drugs. GSK is developing vaccines, which is fine, but overall, he can't see the previous massive expansion in this space. Currently, the multiples are fair for pharma companies. There's also pricing pressure on drugs in the U.S. as we saw during the 2016 election.

Sales of $7.8 billion was up 2%, which doesn't do a lot for his interest. EPS was 49%. You are getting no top line growth or bottom line growth. A lot of their products have been on the market for a long time. They are trying to switch into a new HIV product, but has competition that has been doing it for a long time.

Healthcare was the worst performing sector in the S&P 500 in 2016, but has been a strong performer this year, and this company has not followed suit. He likes that they have 3 very distinct businesses. One in HIV, one in vaccine, plus a consumer products business. The market is undervaluing all 3 businesses. If you were to break the company up into 3 separate distinct businesses, that would unlock significant shareholder value. Dividend yield of 5%. (Analysts’ price target is $45.)