Over the past year, the GSK (LSE: GSK) share price has lagged behind the FTSE 100, falling 14% versus the Footsie’s gain of 14.9%. This leaves the stock languishing at #91 among Footsie members over 12 months.
On Friday (14 February), this stock closed at 1,432.5p, valuing the biopharma giant at £59.4bn. Since Valentine’s Day 2024, the shares have moved between a 52-week of 1,823.5p (set in May) and a 52-week low of 1,282.5p in November. Right now, they lie towards the lower end of this range.
Notably, this lack of price momentum and direction has persisted for years. This stock is down 15.9% over five years, a period during which the FTSE 100 has climbed by 17.9%. Furthermore, the chart of the share price over the past decade closely resembles the teeth of a saw — zigzagging up and down in a range between £12 and £18.
We were big on this one
In short, the GSK share price has disappointed shareholders for years. I know, as I have a tiny holding in this business, while my wife has a more meaningful stake. For decades, GSK was my family’s largest shareholding, because my wife worked for this firm for 31 years. But on departing in April 2021, she sold almost all her shares. This was very lucrative, because her company agreed to pay all taxes on these sales, thus saving her large sums.
Betting the price will fall
On Friday, I spotted a breaking story in the Financial Times, which revealed that hedge fund Citadel — run by US billionaire Kenneth C Griffin — has bet big on this FTSE 100 heading south.
Ken Griffin is one investor to be reckoned with. He has a net worth of around $44bn, while Citadel itself managed $65bn of assets at end-2024. Last year, this fund returned 15.1%, versus 23.3% for the US S&P 500 index.
Citadel revealed it has taken a £305m short position against GSK. This rises in value as the share price falls. This is the biggest bet against this business since 2013. Under UK rules, short bets exceeding 0.5% of a company’s market value must be disclosed. At 0.51%, this short slightly exceeds this level.
Could Citadel be wrong?
I’d be reluctant to bet against Ken Griffin and his mighty Citadel. Nevertheless, I believe there must be more suitable stocks out there to bet against.
For example, the GSK share price has jumped by 10.7% since 14 January. Also, GSK shares trade on a forward price-earnings ratio below 9.1, delivering a future earnings yield of 11%. Hence, the dividend yield of 4.3% a year is covered a healthy 2.6 times by earnings. To me, these don’t resemble the fundamentals of a company in crisis so GSK may still be worth considering.
What’s more, in its latest results released on 4 February, the group raised its long-term sales forecast and unveiled a £2bn share buyback lasting 18 months. That said, while sales of HIV and cancer treatments are strong, GSK’s late-stage pipeline of new drugs and vaccines needs a boost. Also, the firm faces an ‘earnings cliff’ three years from now, when HIV patents begin expiring.
As for me, my GSK holding will stay put for now. However, I will be paying close attention to all the company’s announcements during 2025!
