Since the FTSE 100 index plunged below 5,000 on 23 March, share prices have largely only gone upwards. Since late March, the FTSE 100 rose near-relentlessly, climbing almost every week. By 7 June, the index had soared 30% above its 2020 low.
The FTSE 100’s worst week since March
But the week just gone was the worst for almost three months, leaving complacent investors reeling. A four-day losing streak from Monday, snapped by a 0.5% recovery on Friday, saw the FTSE 100 dive 5.8% in the week. The FTSE 250 index fell even further, down 6.4%.
We should forgive Mr Market for having a minor meltdown. On Thursday, when the FTSE 100 dived 4%, we discovered that the UK economy had shrunk 20.4% in locked-down April. Blimey!
This FTSE 100 winner is immune to coronavirus
Clearly, we need to get Covid-19 under control, so British workers can rebuild our shattered economy. But the recovery’s shape and speed will determine how quickly corporate earnings recover to support higher share prices.
Meanwhile, some solid companies have proved completely immune to the coronavirus. One of these fortress FTSE 100 firms is ‘big pharma’ player GlaxoSmithKline (LSE: GSK).
Neil Woodford ditched GSK, then blew up his funds
I’m a cheerleader for GSK, because I’ve been an admirer of this British powerhouse since I was a teenager. I’ve owned this FTSE 100 share for most of the past 30 years. Also, two family members have clocked up 50+ years between them working at GSK.
Former star fund manager Neil Woodford was once a big fan and major shareholder of GSK too. The FTSE 100 star was a core holding of Woodford’s once-successful income funds. Then Woodford sold his entire GSK holding (worth £1.2bn) in May 2017. Since then, his eponymous funds have spectacularly crashed to earth. Oops.
GSK is changing dramatically
GSK is actually three global businesses in one: researching, developing and manufacturing pharmaceuticals, vaccines and consumer-healthcare products. After a major reshuffle, GSK is now ranked at #4 in the FTSE 100. At 1,599p a share, its market value is £80.2bn.
As a mega-cap company, GSK is all big numbers. It employs 100,000 people worldwide and dates back to 1715. The FTSE 100 firm is a huge spender on research and development, boosting investment to £4.3bn in 2019 alone.
In 2019, its sales hit £33bn and pre-tax profit leapt to £6.2bn, up 29% from £4.8bn in 2018. In April, GSK revealed first-quarter sales up 19% year-on-year.
A decent dividend and future growth?
Many investors regard GSK as a safe, boring FTSE 100 share paying a high dividend (currently yielding 5%). The shares trade on a price-to-earnings ratio of under 15 and the 80p yearly dividend is covered 1.34 times by earnings. Solid and safe, but dull.
In 2020, GSK shares bottomed at 1,328p (16 March) and peaked at 1,587p (24 January). Despite Covid-19, the shares are up 1% over 12 months. But what if GSK becomes a more exciting growth share, as in its go-go years?
Today, it has 37 new medicines and 15 new vaccines in development. Furthermore, ViiV Healthcare (GSK’s HIV/AIDS joint venture) has Cabotegravir. This HIV-prevention injection is so efficacious that clinical trials were stopped three years early. Astonishing.
In short, combining a low rating and high dividend yield with potential growth, GSK shares are my #1 FTSE 100 stock for patient investors.
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As the realities of ‘life under lockdown’ begin to bite, many of the stock market’s ‘go-to’ high-yielding companies have either taken an axe to their dividend pay-outs… or worse, opted to suspended them altogether – for the near-term at least.
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Cliffdarcy owns shares of GlaxoSmithKline. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.