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Why the CSL share price rose 7% in October

The CSL Limited (ASX: CSL) share price was up 7% in the month of October. CSL shares started last month at $238.40 a share but closed yesterday at $255.81 – a monthly gain of 7.33%. CSL shares have opened this morning higher still and are going for $258.32 at the time of writing, which is just slightly shy of its all-time high of $258.78.

This monthly gain adds to what has already been a stellar year for CSL shares. Back at the start of the year, CSL was going for $185.38 – meaning its lucky shareholders have banked a year-to-date gain of almost 40%.

Why have CSL shares shot the roof in October?

CSL has long been a market darling and has delivered phenomenal growth since it was privatised in a government float back in 1994 for a price of $2.30 per share. The company operates in the evergreen growth healthcare sector and has become a market leader in blood plasma research and disease treatment through its Behring division. Its Seqirus division also leads the country in vaccine research and antivenom production and is the largest supplier of the annual influenza vaccine that millions of Australians take every year.

Sentiment has remained bullish for this healthcare giant, particularly after its results for FY19 were released in August. The company reported revenue growth of 11% to US$8.5 billion and profit growth of 17% to US $1.92 billion – truly knockout growth numbers for the third-largest business on the ASX.

Investors also know that CSL’s phenomenal earnings base is also largely immune to the business cycle or any kind of economic downturn or recession. Its customers (which includes the government) aren’t likely to stop ordering vaccines from this company if tough times hit the economy – likewise with its blood medicines.

Is CSL a buy today?

Of course, having a growth company that has a defensive earnings base isn’t going to come cheap. CSL shares are trading for over 40 times earnings on today’s pricing, which is well above the current market average of 18. However, if you look back at most pricing points over the past five years at least, CSL would very rarely have looked cheap by conventional standards. You could do worse than buying into CSL when the stock eventually pulls back.

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Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia has no position in any of the stocks mentioned. 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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