Would Warren Buffett buy CSL shares?

Would legendary investor Warren Buffett buy CSL Limited (ASX:CSL) shares right now?

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

One of the most successful investors in history is Berkshire Hathaway's Warren Buffett.

At the last count the legendary investor had amassed a fortune of US$82.6 billion according to Forbes.

In order to get there Mr Buffett has invested wisely and with a long-term view.

While amassing a similar fortune may be difficult, I believe regular investors can create significant wealth by following his investing principles.

Four key principles that Buffett follows are listed below. I've used these principles to see if CSL Limited (ASX: CSL) would be a share that he would invest in. Here's what I found:

Buffett invests in companies that he can understand.

I don't think CSL is an overly complex company to understand. The company has two segments – CSL Behring and Seqirus. CSL Behring produces therapies for the immunoglobulins, albumin, haemophilia, and specialty markets, whereas Seqirus is focused on influenza vaccines. Given Buffett's investment in Teva Pharmaceuticals, I feel he would be comfortable with CSL.

Buffett looks for companies with a durable competitive advantage.

While CSL is certainly not immune from competition, the quality of its products and its investments in R&D have allowed the company to build a dominant position in many markets. During the first half of FY 2019 CSL spent US$391 million on R&D and opened its world class Global Hub for Research and Translational Medicine in Melbourne. I think this is something that Buffett would find attractive.

Management must be talented and have integrity.

The company has a very talented and experienced CEO in Paul Perreault. Supporting Mr Perreault is a team of over 1,500 R&D experts which are dedicated to developing and delivering new therapies to solve unmet medical needs and save lives. I expect this would get the tick of approval from Mr Buffett.

Don't overpay for shares.

Warren Buffett famously said: "It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price." I have no doubts that CSL is a wonderful company, but whether Buffett would deem 31x estimated forward earnings as fair is difficult to say.

Conclusion.

Overall, I feel that CSL is a company that Warren Buffett would be interested in, though I suspect that he might prefer to get in at a lower level in order to gain a more compelling risk/reward.

However, if you are planning on investing for the long term then I would certainly pick up shares at today's price as I believe CSL is well-positioned to continue its strong form over the next decade and provide investors with market-beating returns.

In addition to CSL, I think fellow healthcare stars Cochlear Limited (ASX: COH) and ResMed Inc (ASX: RMD) would be worth considering with a long-term view.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Cochlear Ltd. and ResMed Inc. 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.

More on Growth Shares

a happy investor with a wide smile points to a graph that shows an upward trending share price
Growth Shares

Here are the top five ASX 200 shares in Macquarie's model growth portfolio

These ASX 200 shares are highly rated by analysts at Macquarie.

Read more »

a man with a wide, eager smile on his face holds up three fingers.
Growth Shares

3 ASX shares to buy in 2024 and hold for the next 10 years

Analysts think these top shares are in the buy zone right now.

Read more »

A man leans forward over his phone in his hands with a satisfied smirk on his face although he has just learned something pleasing or received some satisfying news.
Growth Shares

4 ASX growth shares I think will benefit from interest rate cuts in 2024

Not only will home loan holders rejoice, investors of these stocks could also be yelling with joy when the Reserve…

Read more »

A smiling woman sits in a cafe reading a story on her phone about Rio Tinto and drinking a coffee with a laptop open in front of her.
Growth Shares

3 of the best ASX growth shares to buy now

Analysts see plenty of upside for these buy-rated shares.

Read more »

A man and woman in an office look at a laptop and discuss investing, budget strategies or other financial concepts
Growth Shares

Here's why analysts love these buy-rated ASX 200 growth shares

There's a reason analysts are feeling bullish about these companies.

Read more »

A woman with strawberry blonde hair has a huge smile on her face and fist pumps the air having seen good news on her phone.
Growth Shares

Big returns could be coming for high-flying Lovisa shares

Morgans doesn't believe it is too late to snap up this hot stock.

Read more »

Smiling young parents with their daughter dream of success.
Growth Shares

Why these ASX 200 growth shares could be top buys now

Analysts are feeling bullish about these growth stocks. Let’s see what they’re saying.

Read more »

Concept image of a man in a suit with his chest on fire.
Growth Shares

Ignore the noise and buy this hot ASX growth stock

A recent pullback may have created a buying opportunity according to Bell Potter.

Read more »