Is CSL Limited (ASX: CSL) the best blue-chip share to buy on the local market? From memory I’ve made it my top monthly stock to buy twice over the past year and not for nothing either.
This morning the healthcare giant printed a new record high of $244.99 despite it releasing no material news to the market.
However, CSL has recently enjoyed a number of broker upgrades to its valuation as I covered in this article two days ago.
According to financial news wires Goldman Sachs, Morgan Stanley and Credit Suisse have all lifted their valuations thanks mainly to data suggesting CSL is experiencing strong demand for its core immunoglobulin (IG) products used to treat patients with blood problems.
Local investors are also being drawn into the stock as the Australian dollar falls with an outlook for more weakness on the back of more rate cuts or potentially unorthodox monetary policy. CSL reports and earns the majority of its profits in US dollars and local investors are direct beneficiaries of a weaker AUD/USD spot rate.
It’s possible a new bullish broker valuation today is lifting the stock.
As I noted earlier in the week ‘broker valuations’ on these type of growth businesses commonly use a “sum of the parts” methodology where the present value of future cash flows is directly dependent on the discount rate used.
As global interest rates fall discount rates are being lowered to boost the ‘sum of the parts’ valuations.
CSL itself it guiding for another year of double-digit profit growth and this kind of return is likely to prove more attractive given falling risk-free and risk-on rates globally.
As stated before I wouldn’t be averse to buying CSL shares even at today’s elevated levels. Others in the healthcare space worth a look include Sonic Healthcare Limited (ASX: SHL) and the richly valued Pro Medicus Limited (ASX: PME).
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Tom Richardson owns shares of CSL Ltd. and Pro Medicus Ltd.
You can find Tom on Twitter @tommyr345
The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia's parent company Motley Fool Holdings Inc. recommends Pro Medicus Ltd. The Motley Fool Australia owns shares of and has recommended Pro Medicus Ltd. The Motley Fool Australia has recommended Sonic Healthcare 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.
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