There’s plenty of chatter this week a few potential inventory market correction. This comes scorching on the heels of an replace from the Financial institution of England (BoE) that contained a warning for buyers.

The financial institution famous that buyers are “placing less weight on risks, such as geopolitical developments or continued high inflation”, which make it extra possible that there might be a pointy correction in asset costs.

Now, to be clear, the BoE isn’t pointing to the timing of the following market decline. Nonetheless, the central financial institution is saying that some investor complacency could also be creeping in. That bought me considering: which inventory would I wish to purchase if we did see a decline?

The pharma group on my watchlist

As a reminder, a inventory market correction is mostly outlined as a decline of not less than 10% from a current excessive. A crash is taken into account to be a drop of 20% or extra.

Whereas that could be scary to some, I think about myself a long-term investor. Meaning I’m keen to look by way of some short-term uncertainty to select up some high-quality shares at discount costs.

The FTSE 100 is up 8.5% for the reason that begin of the yr however I nonetheless think about it a cheerful searching floor. Over that very same time, I’ve watched the GSK (LSE: GSK) share price climb just one.5% to 1,500.5p.

Regardless of lagging the broader index, I like the corporate’s fundamentals. With a market capitalisation of over £60bn and a 3.9% dividend yield, GSK ticks plenty of my packing containers.

One of many world’s main pharmaceutical corporations, the GSK share price has been underneath strain of late. Latest official steering within the US narrowed the addressable market of its Arexvy vaccine. This, mixed with ongoing lawsuits associated to the its discontinued Zantac heartburn treatment, hasn’t helped the share price.

Nonetheless, if we have been to see a UK inventory market correction, I’d wish to spend money on GSK. The corporate is an trade chief with important research and improvement (R&D) actions that totalled £6.2bn in 2023. I consider that economies of scale can profit GSK and drive long-term worth throughout my long-term funding horizon.

On high of that, demand for medication tends to remain fixed, whatever the financial cycle. I just like the trade’s defensive traits and GSK might present a diversification profit to my portfolio.

With a price-to-earnings (P/E) ratio of 14, it’s honest to say GSK isn’t the most cost effective inventory on the market proper now. Nonetheless, a broader market decline might properly influence its valuation and I’ll be ready on the sidelines to purchase.

Silly takeaway

I’m a fan of GSK’s enterprise and the sector through which it operates, however there are dangers which will influence my funding thesis.

We’ve seen in current weeks that regulatory hurdles can swing the potential gross sales of a brand new drug. The attainable risk from lawsuits and failure price of recent merchandise within the R&D pipeline may also influence on valuation.

Nonetheless, I’m a believer in backing long-term leaders of their discipline. If we have been to see a inventory market correction, GSK is one inventory I’d be trying to purchase.