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Much appreciated, thanks.
And if I can return a favour of sorts, there are only 2 names I would touch
in the construction sector fwiw - BBY and MGNS.
And even those 2 companies have had some previous issues.
the listed construction sector has been a minefield for many private investors,
unless very agile, lucky, or both. Good fortune.
"but then you explain why following the Brexit referendum. GSK and multiple other overseas earners went on an absolute tear upwards? "
Two reasons :
Well if sterling drops considerably then the revenue achieved from oversees currencies like the Dollar when converted back into sterling increases ...so the foreign revenue "values" appear higher in sterling terms...
Added to that ..the shift of investments from companies importing goods or only doing business in the UK where their costs would potentially increase and revenues potentially drop...
How much a company like GLAXO or SHELL etc actually benefit from the fall in the pound depends largely on what currency hedges they set and buy at.....because of course they don't know in advance the future movements of the currency
They also do accounts based on "constant currencies" which tries to mitigate these currency fluctuations and make comparisons easier
You can gain from revenue in "sterling terms" but lose slightly on the currency hedge ...because you actually agreed an exchange rate higher than what the spot currency exchange actually was post Brexit...
Yes, daily trade is about 0.1% of the total issued shares of GSK. How does it compare with other pharma companies? It is about the same for AZN!
OK get that now, but then you explain why following the Brexit referendum
GSK and multiple other overseas earners went on an absolute tear upwards?
fatprofits
A company the size of Glaxo with the size of revenue done in Dollars/Euro or even Indian Rupee or Chinese Yuan will ALWAYS do currency hedges and swaps to try and balance currency movements and make their revenue and cost predictions and calculations easier .....far,far too risky not too
Thanks for the clarification, I was not aware they hedged.
Do they?, I've never seen GSK reference currency hedges.
Look in the results statements and when required/have any material effect, they are reported in the finance costs statements
Net finance costs for Q2
"Total net finance costs were £228 million compared with £216 million in Q2 2019. Adjusted net finance costs were £227 million compared with £220 million in Q2 2019. The increase primarily reflected reduced swap interest income on foreign currency hedges..."
Hi Denby,
Yep all the European stocks are struggling with the combined effects of COVID and BREXIT. I have just had a quick check through the last set of company reports to ensure I was not way off base. Yes the US is a larger market for GSK products, but Europe does have a significant market as well for GSK.
So really it comes down to will we get a deal or not, if we do then I would bet GSK will rally.
If we don't then that is a new scenario to just normal elections and currency movements.
GSK can take steps to mitigate the impact but lets say we move to WTO rules, is that an extra 10% on GSK products made in the UK? Will it delay products at ports (some of which may have a shorter shelf life?)
Do they?, I've never seen GSK reference currency hedges.
Marcus ,
Just seen your last post GSK is following the footsie
Marcus,
I could not find any short positions either but I could not find anything under 5% but maybe anything under that might be combined to 4--6% ? who knows ?
I appreciate the currency issue, but the currency fluctuations don't account for a 15% fall in the share price. I'm more inclined to think that a lack of restricted access to EU markets would be a bigger impact long term.
GSK takes out currency hedges just like any of the other big Dollar/Euro companies.....the issue will be more in relation to whether those currency hedges have been priced right or not, and whether swap interest is income or cost....and what to base future currency hedges on ....
It is the hedge bets that make or break the finance costs as they can compensate the actual currency effect further up the balance sheet
* weaker GBP
Marcus, GSK is a big USD earner. Weaker GBB/USD is a benefit
and the reverse applies.
Take a look at how GSK traded in the days following the referendum
to see this play out.
Brexit deal = stronger GBP.
ps from what I can see there are no declared short positions in GSK, so to me this is people holding cash positions until they see some price stability and some stability in the Macro economic factors.
I've watched this share being walked down from 1600p and I just wonder how big a factor the lack of progress on a BREXIT deal is for this share.
A deal on goods would surely be a positive for this share as GSK will export a great many products, similarly a no deal would hit this share as there will be competitors in say Canada who will have a more advantageous position with lower tariffs.
If this is the price for a few 100 fishing vessels then to me it is a bad miscalculation by the HMG. Normally at this price I would be jumping in with both feet, but to me the lack of progress on a deal with the EU makes calling the bottom all the more difficult.
Typo!
So since then - the market has gone for the full month in discounting the news.
The full MONTY.
- Not "the full month"!
That Q2 RNS came out near the end of July. The SP dropped noticeably on the day (after first intradaying all the way up to 1600) .
So since then - the market has gone for the full month in discounting the news as if it was a profit warning. Would be perverse if the market punished the SP further - it would appear to be fully discounted into the current price and then some.
There are 5 billion shares in issue and the daily volume is a tiny,tiny ,tiny fraction of that ..between say 0.1%-0.2% traded ...and these small volumes decide the daily share price purely on the sentiment of those City traders/private investors deciding to sell and the price to which they are being offered by a buyer...
The City of course makes its money through small profits off vast numbers of trades , but the trading can effect the share price by 1-2% quite easily given the smallish volumes
This is happening across the market
"...While we are maintaining our 2020 Adjusted EPS guidance, there remain
notable risks to business performance over the balance of the year.
In particular, the outcome is dependent on the timing of a recovery
in vaccination rates, particularly in the US, which we anticipate
in the third quarter. If we were to experience a delay in this recovery
we could see a significant impact in 2020. In the case of, for example,
a three month delay, the impact on adjusted EPS would be up to 5
percentage points..."
It may be worth reading the Guidance paragraph in the Q2 statement.
GSK spell out the impact of lower vaccination uptake because of
COVID.
agree with you but it is tempting at these prices just buying in 5000 share lots at the moment as this is a long term hold and div has a good coverage,
Only thing is when it is split the cost is quite large.
If history repeats itself then I don't think 1300 will be seen. Prefer just a little below 1350-ish with 1300 as absolute worse case scenario. If lower than 1300, I won't just be shocked in mouth agape fashion, but something else beyond our ken would be going on.
There have been 2 major drops of this magnitude since the last big market crash era of 2007-2009. The floors of both those swung wildly up and down, but the SP kept temporarily revisiting their lows for 3 to 4 months in each case.
I'm guesstimating that floor is just a little below 1350-ish at most, but if history repeats itself then it won't be until early new year, January, before the long term uptrend reasserts its authority IMO. In the meantime I won't be surprised should the SP veer wildly from down here-ish, up to maybe circa 1450's and too and frowing all the way to January next year.
I have my own strategy for rebuying so will try and demonstrate some self discipline, but know fine well I will be sorely tempted should the SP sink to 1350 or just below.
Long term SP expectations? Circa £20 by this time next year. But violent swings all the way non-stop.