What’s going on with the CSL Limited (ASX: CSL) share price?
The S&P/ASX 200 Index (ASX: XJO) has had another phenomenal day. By the market’s close, the ASX 200 was up 2.24% to 6,144.9 points, decisively breaking through the 6,000-point mark that it flirted with last week.
Most ASX blue chip shares performed strongly today. The ASX banks surged, as did Woolworths Group Ltd (ASX: WOW), BHP Group Ltd (ASX: BHP) and Telstra Corporation Ltd (ASX: TLS).
But something’s missing here – CSL.
That’s right, as the ASX 200 rallied, CSL has been left in the dust. By the end of the day, CSL shares were down 2.39% to $278.50. As the largest ASX company, CSL has the heaviest weighting on the ASX 200 index. And as such, this underperformance sticks out like a sore thumb.
So what’s happening?
CSL share price continues to underperform
Two weeks ago, I wrote about how CSL shares were lagging the market. Since then, CSL shares have fallen another ~6%, while the ASX 200 has rallied over 9%.
Not even the news that CSL has made a new acquisition today could get investors on side.
But I think an examination of what’s really been going on with CSL shares this year can shed some light.
Below, we have a graph of the ASX 200 index – represented here by the iShares Core S&P/ASX 200 ETF (ASX: IOZ) over the past 6 months.
IOZ 6-month chart and price data | Source: fool.com.au
And here we have a graph of the CSL share price over the same period:
CSL Limited 6-month chart and price data | Source: fool.com.au
As you can see, the CSL share price was something of a safe haven for ASX investors over March and April. Between 20 February and 23 March, the ASX 200 index fell over 36%. By contrast, the CSL share price ‘only’ fell by around 16% over the same period.
What’s next for CSL?
You might be thinking it’s a great time to buy CSL shares today. And if you’re an ultra long-term investor, I would back you up. Before the coronavirus pandemic, CSL shares were perennially at all-time highs. Investors seemed to see any hint of a dip as a chance to ‘pick up a bargain’. And this strategy worked well.
But today, I think the market is starting to realise that even great companies like CSL can’t be priced at ‘growth company’ levels forever. CSL is a behemoth now with a market capitalisation over $125 billion. I do still think CSL has a lot of growth in its future but, with a price-to-earnings ratio of 45, I don’t think it has the ability to bang out the high levels of growth the market seems to think is still possible.
As such, I wouldn’t be surprised if the CSL share price continues to underperform the ASX 200 going forward.
That’s why I’m looking at these ASX shares over CSL today!
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As of 2/6/2020
More reading
- The ASX bank dividend recovery may be better than what the market thinks
- ASX 200 jumps 2.4%, unloved shares keep rising
- Top brokers just upgraded these 3 ASX stocks to “buy”
- Not keen on Westpac? Then buy these top ASX dividend shares instead
- What 2020 has taught us about investing
Sebastian Bowen owns shares of Telstra Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool Australia owns shares of Woolworths Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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