The GlaxoSmithKline (GSK) share price has been a top performer in the FTSE 100 this week as investors react to the big investment by Elliot Management. The GSK stock is trading at 1,357p, which is slightly above yesterday’s close of 1,348p. It has gained by almost 7% since yesterday.
What happened: GSK is a major pharmaceutical and consumer products company that operates globally. It operates in three business segments; prescription medicines, vaccines, and consumer health products. Its vaccines are consumed by more millions of people globally. Some of its popular consumer products are Sensodyne, Aquafresh, Panadol, and Eno, among others.
GSK has also been an underperformer this year. As shown below, it has underperformed other similar companies like AstraZeneca and Pfizer. It has also lagged the iShares Pharmaceutical ETF (IHE).
GSK stock vs peers
Therefore, this performance made it an attractive bet by activist investors. This week, Elliot Management, the fund ran by Paul Singer announced that it had acquired a multibillion dollar stake in the firm. This pushed its stock higher as investors waited for actions by the fund manager.
Some of the top actions that the fund could propose include separating its business and even boosting its dividends or buying more shares. The firm is already doing this breakup by separating its pharmaceuticals and drug development while the rest will focus on consumer healthcare. He could also pressure the firm to spend more money in acquisitions.
Over the years, Elliot has run many activist investments. Some of its biggest ones are on Softbank, Citrix, Cognizant, and Procter & Gamble.
GSK share price outlook
Turning to the daily chart, we see that the GSK share price has been in an overall bearish trend that started in May last year. It dropped to a low of 1,190p in March this year. Since then, the stock has been in a relatively strong upward trend. Along the way, it has formed what seems like an inverted head and shoulders pattern, which is usually a bullish signal.
It has also moved above the 50-day moving average and is slightly below the 200-day moving average. Therefore, in my view, the stock will likely rising as bulls target the 50% Fibonacci retracement level at 1,523p, which is 12% above the current price. However, a drop below the 78.6% retracement at 1,330p will invalidate this trend.
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GSK stock price chart
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