For obvious reasons, pharmaceutical companies have been in the news a lot recently. But one of them appears to have slipped under investor’s radars: GlaxoSmithKline. GSK Shares are looking good value at the moment.
Why this giant of the drug world has seen its share price decline of late is up for debate. But, it certainly looks to have a bright future with plans to demerge its consumer healthcare business in 2022.
The last month or so has seen the share price starting to slowly climb back up again and when I checked earlier today, they were trading at 1,386p each. Many folks consider GSK a good buy at this price and a fantastic income stock for their portfolios. I think I’d agree.
Its forecast dividend yield is 5.7% and that’s covered 1.4X by earnings. Not too bad. It also has a consensus analyst price target 20% higher than the current share price. Now that doesn’t guarantee anything of course, but it’s still reassuring.
Buy Low contracts
But of course, as a big fan of stock options, I would never pay full price for GSK shares.
I’d rather pick them up at 1,375p and be paid 51p for the privilege. That would give me an effective purchase price of 1,324p per share, not the current 1,386p. That’s a nice discount.
And earlier today, I could have done exactly that.
You see, I could have sold a ‘Buy Low’ contract that would trigger if the price of GSK shares fell below 1,375p by the close of play on the 19th of March. And the buyer of that contract would have immediately paid me £508 after commissions. With 50 days to run, that equates to an annualised yield of 26.9%.
In return for that lovely non-refundable payment, I would commit to buy 1,000 GSK shares for a grand total of £13,819 (including the stamp duty) if the share price was trading below the 1,375p trigger point on the expiration date.
And if it stays above that level, then my commitment will expire, and I’d still get to keep the £508.
That sounds like a win-win situation to me.
If this style of reduced-risk investing appeals to you then why not check out the training programme we offer at FIRE Revolution.
We run a comprehensive and fully supported coaching programme to show you exactly how you could be making trades just like this within a few months.
Over 100 clients have now gone through the training programme and I think it’s safe to say, once they learn to invest this way, they never go back to traditional ‘buy and hope’ investing again!
Third Friday Ltd are not regulated by the Financial Conduct Authority and the FIRE Revolution training programme is purely educational in nature. Under no circumstances do we provide any financial trading or investment advice. Any examples used are for educational purposes only and should never be construed as advice. We accept no responsibility for any investment losses you may incur. Please consult a financial advisor or other qualified professional if you are in any doubt as to the suitability of the strategies we teach.