FNArena’s Weekly Insights – July 13 2020
Dear time-poor investor: the debate continues about what to expect from economies and equities in the year(s) ahead, plus a glimpse into the headwinds affecting the CSL share price
In Part One of this week’s Weekly Insights:
-What’s Wrong With CSL?
-T.RowePrice: Market Optimism Is Deceiving
-Corporate Debt: New Records
-Conviction Calls
What’s Wrong With CSL?
Seldom seen such a lacklustre share price performance from all-around star stock CSL ((CSL)) when regular defensives including Woolworths ((WOW)), Coles ((COL)) and ResMed ((RMD)) are putting in a stellar performance.
The question is on many investors’ lips these days: what is wrong with CSL?
The answer, it seems, is two-fold. On the one hand investors now realise the virus and related lockdowns are impacting on plasma collection, in particular in the south of the USA where infection numbers are thriving (so to speak).
The offsetting factor is that a higher US unemployment rate, equally a result of the pandemic, should translate into more donors, which should boost CSL’s collection abilities.
The company is offering higher incentives to US donors to compensate for the temporary interruption, and this will put pressure on its margin.
The public debate that is currently raging behind the scenes is whether one cancels out the other, or whether we are witnessing a sequence of events, i.e. first comes the dip, then to be followed by a firm boost.
Further complicating the debate is that global demand for CSL’s flu vaccines remains robust, suggesting potential for an upward surprise.
Then there is the other matter of growing potential for increased competition with a number of biotech firms across the globe successfully trialing potential future treatments that, if successful, will eat into CSL’s core products and markets.
It is this potential future competitive threat that is possibly weighing most on the share price post-April.
Keen observers will have noticed CSL is not acting like the proverbial sitting duck, keeping the fingers crossed and hoping for the best. The company announced two acquisitions already with the latest, a gene therapy product for haemophilia B, (more) tangible proof the company is not afraid to potentially disrupt itself, according to commentary by various analysts post the announcement.
Of course, one of the major attractions for owning CSL shares is the in-house pipeline of future products under development. Here the company should have a few announcements to make in 2021.
