If I was looking to buy one ASX company today to hold for long term, I would not hesitate in buying CSL Limited (ASX:CSL). Despite the share price increasing by 10% over the past 12 months, I believe it has further upside in the short term and will easily beat the market over the long term.
CSL’s core business is the manufacture of products derived from human plasma. It is one of the largest blood plasma producers globally with operations in Australia, the United States and Europe. CSL will continue to see an increase in demand for its products around the world as a result of ageing populations in the developed world and rising wealth levels in emerging markets. This should continue to drive double-digit growth over the longer term.
CSL also delivers a range of other vaccines and pharmaceuticals, including seasonal flu vaccine. CSL intends to develop new products which are protected by its own intellectual property. Its significant investment in research and development should ensure it continues to consistently develop new, high-margin products.
The size and scale of CSL’s operations give it a substantial cost advantage over its competitors. Itss reputation for reliability and quality has established the company as an extremely powerful brand in the blood products arena.
Some investors are reluctant to invest in CSL due to the relatively low dividend yield of 1.7%, however it has continued to prudently reinvest profits into the business to generate high returns on shareholders equity and develop new products. As a consequence, the company’s share price has increased by almost 700% over the past decade, far exceeding the return income investors have received by investing in high-dividend stocks such as Telstra Corporation Ltd (ASX:TLS).
CSL should form a core position in any long-term focused portfolio and the current share price offers good value for a quality company.
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Motley Fool contributor Bradley Murphy owns shares in CSL Limited mentioned in this article.