Is CSL Limited (ASX: CSL) the best ASX blue chip?
In the ASX20 there are number of businesses in different industries:
Commonwealth Bank of Australia (ASX: CBA), BHP Group Ltd (ASX: BHP), Westpac Banking Corp (ASX: WBC), Australia and New Zealand Banking Group (ASX: ANZ), National Australia Bank Ltd (ASX: NAB), Macquarie Group Ltd (ASX: MQG), Woolworths Group Ltd (ASX: WOW), Telstra Corporation Ltd (ASX: TLS), Wesfarmers Ltd (ASX: WES), Rio Tinto Limited (ASX: RIO), Transurban Group (ASX: TCL), Woodside Petroleum Limited (ASX: WPL), Scentre Group (ASX: SCG), Brambles Limited (ASX: BXB), Insurance Australia Group Ltd (ASX: IAG), Amcor Limited (ASX: AMC), South32 Ltd (ASX: S32), Suncorp Group Ltd (ASX: SUN) and Coles Group Limited (ASX: COL).
Firstly, I think that CSL is better than quite a few of the above names because CSL is a non-cyclical business. Banking and resources are very competitive industries that experience a lot of ups and downs, not very consistent. The fact that CSL operates in the healthcare industry means there's a constant and growing demand for its services, particularly with the ageing demographics of the western world.
A number of the other blue chips have probably already experienced their peak market power and now face (at best) slow growth like Woolworths, Coles, Telstra, Scentre Group and IAG. CSL's core plasma product is projected to grow by high single digits per annum for the next few years.
Over the longer-term I think CSL can continue to grow its profit at a faster pace than Amcor and Brambles because of its commitment to investing in research & development and the consistent release of new products which open up new revenue streams.
One of the other main reasons why I think CSL is better than nearly all others is its international earnings. Most of the other big ASX shares generate a lot of earnings from Australia, whereas CSL is a big overseas earner. The diversification of the risk lowers the risk of an Australian recession and provides a bigger total addressable market.
Foolish takeaway
Macquarie ticks a lot of the investment boxes as well, and it is cheaper, however the quality of CSL has shone through over the past decade. CSL is trading at 29x FY20's estimated earnings. Whilst I don't think now is the best time to buy CSL shares, I would rather own it than nearly all the other ASX blue chips.
