The GSK (LSE: GSK) share price has toppled 16% in 2022. But investors using AJ Bell’s platform are loading up on the pharmaceuticals manufacturer again.
The FTSE 100 company accounted for a whopping 15.1% of all buy orders on the Youinvest platform in the seven days to 18 October.
Demand for GSK shares was far ahead of that of second-placed Legal & General. The life insurer accounted for a much lower 6.4% of all buys in the past week.
If I had cash to spare, I’d buy it for my own shares portfolio. Here I’ll explain why.
Safe haven
I think stocks like GSK are some of the best ways that investors can protect themselves from economic crises. Spending on prescription medications is one of life’s non-negotiables, after all.
This resilience is perhaps why AJ Bell investors are piling into the healthcare business today. City analysts expect earnings here to rise 15% in 2022 and 10% next year. The profits outlook for most other UK shares is much more uncertain as the global economy cools.
The cheapness of GSK shares could be another reason why it’s in high demand right now. Today it trades on a forward price-to-earnings growth (PEG) ratio of just 0.7. A stock is considered undervalued if it trades on a reading below 1.
On top of this, GSK also offers plenty of value from a dividend perspective. Its forward yield of 4.2% crushes the corresponding 2.6% yield of fellow large-cap pharma stock AstraZeneca.
Risky business
As a fan of value stocks, GSK ticks important boxes for me. But I do have concerns about buying the business today.
The task of successfully developing drugs is complex and costly. The huge sums required can drain any cash a company might be intending to return to shareholders.
Problems at R&D stage can also cost a fortune in extra expenses and lost revenues. In some cases, launch delays can last years, and medicines may be scrapped altogether.
The spinning off of its Haleon consumer healthcare operations leaves GSK’s profitability even more dependent on the unpredictable business of drugs development too. Products like Sensodyne toothpaste and Panadol painkillers once provided reliable revenues streams to the company.
An industry heavyweight
On balance, however, I think investing in GSK shares today is a good idea.
The business has a tremendous track record when it comes to drugs development. Products like its big-selling HIV medicine Triumeq make the business one of the top 10 biggest pharmaceuticals developers in the world.
Encouragingly GSK has a packed development pipeline across fast-growing therapy areas like infectious diseases and oncology. As of June it had 21 treatments at the late Phase III testing stage.
Demand for medicines is tipped to soar as healthcare spending in emerging regions accelerates and the global population increases. I believe GSK is one of the best stocks to buy to capitalise on this theme. And I think it’s a particularly attractive share at current prices.
