I had been singing its praises since last Octoberwhen it was trading at 12 times earnings, which is cheap for Glaxo.
By December, the share price had pickedup 13% from its mid-October lows. But I reckoned there was more to come, and so farIve been proved right.
Glaxos share price is up another 18% so far this calendar year, which for a long-term income play like this oneis rather juicy growth.
I thought Glaxo was a great buy in October, a good buy in December. But is it a buy at all at todays price?
I singled Glaxo out of the FTSE 100 because I hoped the worst of the Chinese bribery scandal was over, and it would be able to reverse falling US sales, which caused almost as much damage to the share price.
Glaxos 1 billion restructuring programme, new lung treatments, encouraging early Ebola vaccine trials, emerging markets sales growth and blossomingViiV Healthcare businesses all looked promising to me.
I reasoned that you dont get many opportunities to buy a top stock like Glaxo at a reduced price, and this opportunity shouldnt be missed.
Yet while the share price growth figure vindicates my faith, Glaxos full-year results, published last month, probably dont.
Annual revenues declined 3% to 23bn, hit by currency headwinds to a degree, but also weak sales of respiratory drug Advair. Turnover fell a worrying 10%, even at constant currency rates.
Earnings per share were just 95.4p, against the 120p markets had predicted one year earlier. Yet still the stock has risen.
There was some positive news in there, as Glaxosplan to create a new consumer healthcare business with Novartis is still on course for completion in the first half of this year, and could trigger 4bn of shareholder returns.
The big question remainswhether Glaxo can replenish its drugs pipeline, to keep up with patent expiries. Management isconfident, but there is a long way to go.
Trading at a more familiar valuation of 17.1 times earnings and yielding 4.91%, the once-in-a-blue-moon Glaxo buying opportunity has passed.
It still deserves a place in your portfolio, but I no longerfeel the need to make a big noise about it. My work here is done.
Buying top companies when their valuation has slipped is my favourite way of making money from the stock market.
But there are other investment strategies, and they may be even more successful for you.
This FREE Motley Fool report 10 Steps To Making A Million In The Market sets out how investing in stocks and shares over the long-term can make you rich.
You might be surprised to discover how ordinary people can become astonishingly wealthy by investing in stocks and shares.
This report shows you how to do it, step-by-step. To find out more, click here now.
Do NOT buy these 3 stocks
Theres lots of opportunity out there in todays market but theres also PLENTY of danger.
In anticipation of Champion Shares PROs brief opening to new members next week, the analyst team behind the Motley Fools most exclusive service has agreed to share 3 stocks they believe YOU would do best to avoid.
PRO research is rarely made available to the general public. To find out the names of these “don’t buy” companies — and to claim your 100% FREE copy of Steer Clear Stocks right away — simply click here.