FNArena’s Weekly Insights – March 29 2021

In Weekly Insights this week:

-CSL, The Answers
-Research To Download

CSL, The Answers

By Rudi Filapek-Vandyck, Editor FNArena

Since listing in June 1994, the performance of CSL ((CSL)) has been nothing but spectacular, with the stock ultimately growing into the ASX200’s largest constituent, beating the far more familiar household names of CommBank and BHP Billiton.

It took the better part of the past 2.5 decades, but Australian investors eventually warmed to Australia’s largest and most successful biotech company, even though it never offered a genuine “yield” to get excited about and the valuation never looked “cheap”.

But CSL performed when others couldn’t, and it kept on simply doing that, until the global pandemic and calendar year 2020 arrived.

Just when it seemed nothing could ever possibly go wrong for Australia’s number one business success story, it somehow did.

While the Australian share market has enjoyed one of the strongest bull markets in living memory, the CSL share price has sagged, clocking up its worst relative performance since the IPO 26 years ago.

Below is an attempt to explain the why behind this remarkable turn of events. More than a simple company-specific expose, it might as well be treated as an informative and educational vivisection of the share market in general, and the past twelve months specifically.

Answer #1: No More Buyers Left

Can an investment ever become too popular?

In overseas markets, particularly in the US, teams of quant analysts are regularly sifting through funds manager statements, drawing up rankings for popular ownerships in an attempt to determine which stocks are over-loved and which ones are temporarily under-owned. Such insights might prove pivotal when exploring the next trading opportunity.

The situation of CSL in Australia is somewhat different.

For most of its ASX-listed existence, the stock did not feature prominently on many active funds managers’ radar. Too expensive, would be the standard response for a long while, in particular during the years of Commodities Super Cycle and strong outperformance from the Big Four major banks.

And frankly, CSL as the topic of conversation among retail investors was simply non-existent. No yield. A high valuation. A complex science and investment-based business model. Predominantly active in overseas markets.

Who in their right mind would possibly invest in it?

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