Should you buy CSL shares before it’s too late?

The CSL share price is currently trading 16.7% below its all-time high of $342.75. As we have seen recently, many quality shares that have been sold-off can surge in an unstoppable rally on the turn of a dime.

With the CSL share price consolidating, is now the time to buy shares in the biotech giant before its too late?

Why is the CSL share price not at all-time highs?

The fact that CSL is trading below its all-time highs could reflect portfolio rotation among many investors. With the broader market performing stronger than expected, many investors will be opting to take their profits and sell blue-chips like CSL. By freeing up capital, investors can then load their portfolio with more beaten-down laggards and other cyclical shares.

In addition to portfolio rotation, some investors might be selling their CSL shares as the company faces rising collection costs during the coronavirus pandemic.

How has CSL performed during the pandemic?

Although CSL is not actively participating in the race to develop a vaccine for COVID-19, the biotech giant is working to develop potential therapies by collecting plasma from recovered patients. In conjunction with other global biotech companies, CSL has launched a campaign in the US encouraging recovered COVID-19 patients to donate plasma. CSL is also collecting recovered donor plasma in Australia, with the company partnering with the Australian Red Cross Lifeblood Service.

There have been some concerns that the global shutdowns as a result of the pandemic may result in a supply shortage in plasma collection. In addition, CSL has the obligation to ensure the safety of its donors by undertaking various disinfecting and screening protocols, which could impact margins.  

Bullish broker note

Earlier this month, analysts from broker UBS released a bullish note on CSL and slapped a $342 12-month price target on the company. Analysts flagged a 15% decline in plasma collection volume for the April–June period, however volumes are expected to recover as US states move to ease regulations. Researchers from the broker continue to see CSL as the preferred option in the health sector based on the company’s robust product pipeline and low level of gearing.

Should you buy?

In my experience, the fear of missing out, especially in unprecedented times such as this, can cloud the decision making of the most experienced investor. However, in the case of a quality company such as CSL, the decision should be straightforward. This market darling has a strong capital position with more than $1 billion in available liquidity and has also reaffirmed its profit guidance for FY20.

If portfolio rotation is the cause for a drop in CSL’s share price, I think that it won’t be sustained for too long and buyers should flood in again. For more cautious investors it may be prudent to wait until August when CSL reports its full-year results to get a better picture of where the company stands.

More reading

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• Where to invest $5,000 into ASX 200 shares immediately
• Is the CSL share price in the buy zone?
• 3 companies with great intangible asset moats
• Why CSL, Harvey Norman, IPH, & Saracen shares are charging higher

Nikhil Gangaram has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia has no position in any of the stocks mentioned. 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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