I think FTSE 100 incumbents Barclays (LSE:BARC) and GlaxoSmithKline (LSE:GSK) could be good additions to my portfolio at current levels as I believe they are undervalued. Here’s why I would be willing to buy at current levels.
FTSE 100 banking giant
Looking at Barclays share price activity, I see value based on current levels. Looking at its 52-week high and low, it had a high of 190p per share and a low of 88p per share, which is less than half the high. As I write, shares are trading for 182p per share.
I understand that Barclays’ share price increase is not a guarantee, however. If the FTSE 100 incumbent’s impressive H1 report is anything to go by, further trading updates could result in a share price increase. The report showed profit before tax of £5bn. This is a considerable increase from H1 2020 with profit of £1.3bn.
Barclays also offers a dividend. Its yield is below the consensus FTSE 100 level of 3% but would make me a passive income nonetheless. I believe shares could the reach 190p in the coming weeks. If I purchased 100 shares at current levels and the price did go up, I could make approximately £1,000 in just a few weeks, for example.
FTSE 100 pharma giant
As I write, shares in GSK are trading for 1,411p per share. The share price has slumped in the past month from 1,525p on 25 August to current levels, which is an 8% drop. I believe this is due to its recent announcement that it is spinning off its consumer healthcare business, provisionally called New GSK. There will also be a cut in dividends, from 80p per share to a better-than-expected 55p per share. New GSK will offer a dividend of 45p per share starting from 2023.
Looking at GSK’s 52-week high and low is where I get my confidence that the share price will rise once more after the dust settles from this announcement. In addition to this, the FTSE 100 incumbent will benefit from the British economy stabilizing further. The stock’s highest price in the past 52 weeks was 1,533p per share and lowest was 1,190p per share.
GSK continues to work hard on developing new drugs. In April, it reported it had won approval to market Jemperli, an endometrial cancer drug it had developed. Progress such as this will also bump up its value.
Risks involved
As a savvy investor, I must consider the risks of both FTSE 100 giants before investing my cash.
Barclays’ primary risk is linked to the state of the world economy and the pandemic. The pandemic did negatively affect operations and financials previously. If new variants and restrictions are introduced, this could hamper it once more.
GSK’s position as one of the biggest pharma firms in the world is a heavy crown to maintain. One risk is its promise to have a net zero impact on the climate by 2030. This will not be an easy feat. If it is unable to achieve this, the negative reaction could hurt its reputation and financials. Performance is also vital as GSK invests heavily in research and development (R&D). If it struggles or hits any roadblocks, R&D could be affected which will hurt future performance too.
