Recently, I’ve been taking the opportunity to sell a few of my stock holdings in order to concentrate my portfolio on my best ideas. FTSE 100 pharmaceutical giant GlaxoSmithKline (LSE:GSK) is one I’ve sold from my portfolio.
Here, I’ll explain why I sold my GSK shares. I’ll also explain where I’m planning to invest the proceeds of my sale.
GSK shares: why I soldÂ
There are a few reasons I sold them. The first is that growth has been underwhelming in recent years. Last year, revenue growth was just 1%. This year, it’s expected to fall 3%.
Of course, GSK has been impacted by Covid-19. Its vaccines division, in particular, has been hit hard because routine vaccination programmes have been abandoned during the pandemic. Revenues in this segment should bounce back post-Covid-19.
However, overall, I see the company’s growth as disappointing. This year, analysts expect the company to generate earnings per share (EPS) of 98.6p. That’s about 4% below the EPS it generated in 2011.
A dividend cut is coming
Another reason I sold GSK is that I’ve been frustrated with the dividend. Sure, the yield has been high in recent years. I was receiving a yield of about 6% from GSK, so I can’t complain about that. However, the dividend payout hasn’t been increased for over five years now. That means it’s fallen in real terms over time.
Additionally, GSK is shortly about to implement a new dividend policy. It has said that from next year, aggregate distributions are expected to be lower than at present. That’s disappointing from a dividend investing perspective.
GSK is set for a split up
Finally, GSK is planning to split itself into two companies next year. I think this is a good move that could help unlock value. However, my holding in GSK was already quite small (less than 1% of my stock portfolio). The split would have resulted in two even smaller holdings. So, I figured it was best to offload the stock now.
I’ll point out that I still think GlaxoSmithKline is a decent stock to own. The company operates in growth industries. And the stock’s valuation looks very reasonable. However, after looking at the investment case, I concluded that there were other stocks that are a better fit for my portfolio right now.
Where I’m going to invest now
As for where I’m going to invest now, I still like the healthcare sector. I’m keen to boost my exposure to this sector. However, I’d like to invest in companies that are generating more growth.
Some names I’ve been looking at include medical technology company Stryker and robotic surgery specialist Intuitive Surgical. These two companies are growing rapidly. They’ve generated five-year revenue growth of 44% and 83% respectively. I think they could be good stocks to buy when there’s some market volatility.
I’m also considering adding to the other healthcare stocks I own at present – orthopedic reconstruction specialist Smith & Nephew, virtual healthcare provider Teladoc Health, and petcare specialist IDEXX Laboratories. In the long run, I think these healthcare stocks have a lot of potential.