We recently made a list of the 10 Best Global Stocks To Buy Now. In this piece, we will look at where GSK plc (NYSE:GSK) ranks among the top ten global stocks to buy.
With the third quarter of 2024 ending, the discourse on the stock market for global equities has shifted back to interest rates. This comes after artificial intelligence drove markets through the course of the year, but with interest rate cuts having commenced in Europe and China’s economy refusing to roar back, global equity investors are carefully parsing through their investments to see which stocks might be worth it.
This was the gist of a note released by Goldman Sachs in July. In it, the bank advised investors to sift through stocks to eliminate those that have exposure to China. This is because Chinese economic growth has remained sluggish, and after Q2 GDP growth figures for the Asian economic giant sat at 4.7%, Goldman and Citi slashed their GDP growth estimates for 2024 to 4.7%. The two banks’ earlier estimates were 4.9% and 4.8%, and in its European investor note, GS’ analysts raised alarm for several potential headwinds for European firms that could emanate from China. The top three of these were a weak demand in China for discretionary products, the country’s plans to tax luxury goods, and potential retaliatory tariffs against European countries after the EU decided to increase tariffs for Chinese made electric vehicles. “While a great deal of earnings downgrades have already occurred year-to-date for our luxury basket, we worry that more could take place,” the Goldman analysts warned, adding that “the valuation premium of the basket has deflated, but remains on the high side of its history.”
A slowdown in Chinese consumer spending, which was also evident in the country’s latest data release that saw retail sales growth sit at 2%, is particularly worrisome for German stocks. This is because they have already felt the pinch of the slowdown during Q2 and H1 2024. For instance, German watch company Swatch saw its China sales drop by 30% in H1 while the luxury goods manufacturer LVMH experienced a 14% Asian sales drop in Q2 which came after Mercedes-Benz’s China sales dropped by 3% in Q1.
For Germany, this is particularly troubling as its economy has suffered after the disruption of cheap Russian gas in the aftermath of the Ukraine invasion. The German economy contracted by 0.3% in 2023 and continued its downward pace in Q2 by posting a 0.1% sequential contraction. German firms’ disappointing Chinese performance came when the country’s overall exports to China dropped by 14% annually in May to sit at €7.5 billion.
Shifting gears, let’s take a bird’s eye view of global stocks. On this front, JPMorgan has some insights. In its mid year outlook, the bank’s chief global economist Bruce Kasman shared that “Global growth has moderated to a still-solid 2.4% (annual rate) and is less dependent on a U.S. demand engine, as recoveries in Western Europe and emerging markets (excluding China) find firmer footing. The manufacturing sector is also showing signs of recovery, helped in part by a pickup in business spending.” However, in the report which was published in July, the bank remained pessimistic about inflation as it shared that core inflation should sit at 3% at the close of 2024. This led it to wager that higher for longer was the way to go and led to a cumulative 35 basis points of easing in developed markets except Japan by 2024 end.
Yet, the European Central Bank (ECB) led the global charge for rate cuts. It cut interest rates by 25 basis points in June and followed it with another 25 basis point cut in September. Additionally, the Bank of England (BOE) also cut rates by lowering rates by 25 basis points to 5% in August for the first interest rate cuts since the coronavirus pandemic was wreaking havoc in 2020. Moving forward, analysts are divided on the BOE’s future rate cuts, and many believe that the ECB might be less forthcoming with the cuts as well.
While several of the world’s biggest economies have suffered this year, global stocks as a whole have performed well. One of the most well known global stock indexes compiled by the MSCI opened at 3,144 points this year. Its latest value is 3,728 to mark a neat 18.5% year to date growth. However, European stocks have lagged in this performance, with the index of the region’s top 600 stocks having delivered a 10.2% return year to date through price appreciation. This is unsurprising since these 600 firms’ Q1 2024 EPS dropped by roughly 2.5%. However, estimates suggest that these stocks can post at least a 10% EPS growth during Q3 2024.
Our Methodology
To make our list of the best global stocks to buy, we ranked the US listed stocks of JPMorgan’s International Equity ETF by the number of hedge funds that had bought the shares in Q2 2024 and picked the top stocks. This particular ETF was preferred because it chose to focus on a diversified set of global stocks as opposed to several others that focused primarily on US tech giants.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
An investor in a suit representing the company, seated in front of a long table of global leaders discussing the company’s investments.
GSK plc (NYSE:GSK)
Number of Hedge Fund Holders In Q2 2024: 36
GSK plc (NYSE:GSK) is a global pharmaceutical company headquartered in Brentford, United Kingdom. As it has been operating in the pharmaceutical industry for more than three centuries, the firm has been able to build a diversified product portfolio. This enables GSK plc (NYSE:GSK) to sell generic and specialty medicines, as well as vaccines — the end result of which means that it can earn consistent revenue even if consumer and healthcare spending is low in a tough economy. GSK plc (NYSE:GSK) has a whopping £2.9 billion in cash and equivalents, which enables it to keep the pedal to the metal when it comes to a robust pipeline. The firm currently has 70 new drugs in its pipeline, out of which seven are in phase three testing. With this pipeline, GSK plc (NYSE:GSK) aims to generate £38 billion in sales in 2031. If achieved, this would enable the firm to grow its current trailing twelve month revenue of £31 billion by 21%. Consequently, investors have to keep up with any trial results, and also ensure that GSK plc (NYSE:GSK)’s high growth drugs such as Nucala and Cavenuva maintain their momentum.
GSK plc (NYSE:GSK) is leading the market with its HIV portfolio. Here’s what management shared during the Q2 2024 earnings call:
“Our oral 2-drug regimens and long-acting injectables continue to transform the HIV marketplace. Dovato delivered sales of £551 million in the quarter. The strong body of clinical data and real-world evidence reinforcing the efficacy and durability of this medicine continues to grow. At the International AIDS conference last week, results of the PASO DOBLE study a large head-to-head randomized clinical trial of Dovato compared against the 3-drug regimen, Biktarvy, showed non-inferior efficacy and significantly less weight gain.
This is important because we know people living with HIV are concerned about taking more medicines as they age as well as the long-term risk of metabolic diseases that can come with weight gain. Our long-acting portfolio also continues to perform strongly, delivering more than 50% of total HIV growth. Cabenuva grew 42%, driven by patient preference and proven and durable efficacy. CASM LATITUDE data presented at CROI and data from real-world cohorts that include over 10,000 people living with HIV in diverse settings has resonated strongly with physicians and has supported increased breadth and depth of prescribing. Apretude grew more than 100% in the quarter. This medicine has demonstrated proven superior efficacy compared with daily orals and a positive safety profile and high patient preference.
As a reminder, the registrational HPTN 084 study of PrEP in women was the first to show 0 infections in participants who received injections as described per protocol. We believe that long-acting therapies are the future of HIV care, empowering people impacted by HIV with choice and addressing the barriers standing in the way of reaching the end of the HIV epidemic. Looking at the long-acting market, we can see that the treatment market is currently approximately 10x larger than the PrEP market at about £20 billion, which will have a significant impact on the sales potential for long-acting options. In the long-acting inject for treatment setting, there are no competitor launches planned before 2028. We continue to see strong progress across our pipeline.”
Overall GSK ranks 7th on our list of the best global stocks to buy now. While we acknowledge the potential of GSK as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than GSK but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published on Insider Monkey. All investment decisions should be made after consulting a qualified professional.
