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.

And here we have a graph of the CSL share price over the same period:

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.

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.

The post Why the CSL share price continues to trail the ASX 200 appeared first on Motley Fool Australia.

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The recent strong run in ASX bank share prices is a sign that the value trade is finally springing back to life.

For the longest while, it was growth stocks like tech that dominated while value stocks played second fiddle.

Investors are rediscovering their taste for these laggards in the big post COVID-19 rebound!

Zero to hero

Financials were the best performing sector on the S&P/ASX 200 Index (Index:^AXJO) today and over the last five trading days.

The rally was fuelled by the sector heavyweights. These are the Commonwealth Bank of Australia (ASX: CBA) share price, the Westpac Banking Corp (ASX: WBC) share price, the Australia and New Zealand Banking Group (ASX: ANZ) share price and the National Australia Bank Ltd. (ASX: NAB) share price.

Shares in the big four jumped by at least 5% on Tuesday, and despite their recent outperformance, they remain significantly below where they were trading before the coronavirus outbreak.

The same can’t be said for other large cap stocks, and that’s what’s driving the big bank rally, in my view.

Better than feared

What is also helping drive the sector higher is the realisation that the COVID-19 disaster isn’t going to do as much damage to the economy as previously thought.

Treasury is the latest to admit it was too pessimistic as it upgraded Australia’s peak unemployment rate to 8% from 10%, reported Business Insider.

The better-than-Armageddon outlook is one reason why Citigroup released a bullish report on the sector.

Dividends on the comeback

While loan deferments and the government’s stimulus support packages end in September and pose a risk to the economy, the broker thinks the deadline may also be a blessing.

“A ‘Rip the BandAid off’ approach by the banks is set to accelerate mortgage impairments, bringing housing losses to fruition,” said Citi.

“However, an outcome of managing balance sheet risk will be in providing a pathway to dividends being reinstated.”

That will be music to the ears of investors as dividends are the main reason why retail investors buy bank stocks.

Don’t underestimate the dividend recovery

ANZ Bank and Westpac opted to defer paying their interim dividends until the coronavirus dust settled, while NAB took an axe to its latest distribution. CBA reports on a different earnings cycle and will only declare its interim dividend in August.

“We forecast higher than consensus dividend growth out to FY22 on milder than expected loan loss outcomes,” added Citi.

“This should see stock prices continue to move higher based on attractiveness of their dividend yields.”

The broker is recommending all the big four banks as a “buy”.

Another to bank on

But it isn’t only our ASX domestic banks that are benefiting from the improving outlook for the broader economy.

The Macquarie Group Ltd (ASX: MQG) share price also made a strong recovery with V-shaped bounce in global markets likely to provide a tailwind to the investment bank’s earnings.

The stock is a “buy” in my book as I think there’s more upside for the Macquarie share price.

More reading

• Why the CSL share price continues to trail the ASX 200
• 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

Motley Fool contributor Brendon Lau owns shares of Australia & New Zealand Banking Group Limited, Commonwealth Bank of Australia, Macquarie Group Limited, National Australia Bank Limited, and Westpac Banking. The Motley Fool Australia owns shares of and has recommended Macquarie Group 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.

The post The ASX bank dividend recovery may be better than what the market thinks appeared first on Motley Fool Australia.

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Although the ANZ region’s tech sector is small in comparison to those in the United States, Europe, and China, it isn’t short of quality.

I believe there are a good number of quality tech companies which are worthy of a spot in most portfolios.

Three of my favourites are listed below. Here’s why I like them:

Afterpay Ltd (ASX: APT)

The first ASX tech share to consider buying is Afterpay. I think the payments company could be a fantastic long term investment due to the sizeable market opportunity it has in the ANZ, UK, and United States markets. These markets alone have the potential to drive strong sales growth for a long time to come. But I don’t expect the company to stop there. It is already plotting an expansion into Canada and I wouldn’t be surprised to see it launch in mainland Europe and Asia in the coming years. The latter could be supported by its new substantial shareholder, Tencent Holdings. It is the US$535 billion owner of WeChat.

Nearmap Ltd (ASX: NEA)

Another ASX tech share to look at is Nearmap. It is a leading aerial imagery technology and location data company which also has a sizeable market opportunity. A recent market update reveals that its annualised contract value (ACV) has hit $102 million financial year to date. This means Nearmap is on course to achieve its ACV guidance of $103 million to $107 million in FY 2020. This is still only a fraction of its total addressable market (TAM), which is estimated to be worth $2.9 billion per year. And it is worth noting that this TAM relates to the countries it currently operates in. As with Afterpay, I believe Nearmap could expand into other territories in the future.

Xero Limited (ASX: XRO)

A final tech share to consider buying is Xero. It is a leading cloud-based business and accounting software provider which has been growing at a rapid rate for many years. This has led to the company surpassing 2 million subscriptions for the first time earlier this year. While this may seem like a large number, it still has a long runway for growth over the next decade. Especially given how less than 20% of the global English-speaking target market is believed to be using cloud-based accounting software at present. I expect more businesses to shift to this technology in the coming years, underpinning solid subscription and sales growth.

More reading

• Will ASX 200 shares hit a record high in June?
• Why CSL, Elders, Evolution, & Xero shares are dropping lower
• These are the 10 most shorted ASX shares
• 3 quality ASX 200 shares to buy and hold until at least 2030
• ASX shares could be the best way to grow your wealth in 2020

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of AFTERPAY T FPO, Nearmap Ltd., and Xero. The Motley Fool Australia has recommended Nearmap Ltd. 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.

The post Why I would buy Afterpay and these exciting ASX tech shares appeared first on Motley Fool Australia.

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