CSL share price ‘ticks all the defensive boxes’: fundie

The CSL Limited (ASX: CSL) share price is up 1.4% in early afternoon trade at $304.58 per share.

The global biotechnology company is outpacing the S&P/ASX 200 Index (ASX: XJO) today, with the benchmark index having only just clawed its way back into the green, up 0.1%.

That’s today’s price action for you.

Now, here’s why this fund manager is bullish on the CSL share price moving forward.

A defensive ASX 200 share in volatile times

Speaking to Livewire, Blake Henricks, portfolio manager at Firetrail Investments said CSL fits the bill as a defensive ASX 200 share likely to remain resilient despite any future market volatility.

“It’s large, it’s liquid, it’s healthcare. So to me, it ticks all the defensive boxes. It’s in a defensive growth category,” he said.

CSL’s plasma business operates one of the largest plasma collection networks in the world.

Which is a core reason why Henricks sees growth ahead for the CSL share price:

I think what’s really important is, the tougher the economy gets, the lower one of their key costs goes. And that’s the plasma collection. This is where they pay donors to give blood and they turn that into plasma. The higher unemployment goes, the more people want to give plasma and the costs come down. On that basis, it’s really attractive as a defensive. 

Henricks acknowledged that some investors may be put off by the high price-to-earnings (P/E) ratio. At the current CSL share price, that’s just over 40 times.

But that P/E ratio is backwards looking. Meaning it’s based on CSL’s share price today and on its earnings over the past financial year.

Henricks believes those earnings are set to increase, bringing the P/E ratio sharply lower:

2023 is already written. 2024, the earnings are looking very strong in our view, and you’re seeing it in a mid to high-20s P/E. They expense all their R&D. It’s a very well-run business. And for a defensive, I can’t go past it.

How has the CSL share price performed longer-term?

Over the past five years, the CSL share price has gained 109%, compared to a 21% gain posted by the ASX 200 over that same period.

The post CSL share price ‘ticks all the defensive boxes’: fundie appeared first on The Motley Fool Australia.

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Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended CSL Ltd. The Motley Fool Australia has no position in any of the stocks mentioned. 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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