This fundie is underweight CSL (ASX: CSL) shares. Here’s why.

What’s in-store for the Aussie biotech giant in 2021?

| More on:
A man stands in front of a chart with an arrow going down and slaps his forehead in frustration.

Image source: Getty Images

CSL shares have had an up-and-down start to the year. Shares in the Aussie biotech company are down 1.9% year-to-date and closed at $279.52 per share on Tuesday.

Despite falling 8% in the last month, CSL still boasts a $127.2 billion market capitalisation. That makes it one of the largest shares in the S&P/ASX 200 Index (ASX: XJO) and a perennial index mover and shaker.

But one leading fundie doesn’t have a great outlook for CSL shares in 2021. Yarra Capital Management recently released a May 2021 investment and portfolio update for its Yarra Australian Equities Fund and CSL was notably “underweight”.

Why one leading fundie isn’t bullish on CSL shares

CSL was noted as one of the key detractors to portfolio performance in the fund’s most recent update. That’s despite Yarra Capital noting that CSL outperformed as many expected the company to benefit from a re-opening of the US economy.

Foot traffic at CSL’s collection centres reportedly increased in recent weeks but that hasn’t changed Yarra Capital’s position. The fund remains underweight the Aussie biotech share, based on its forward valuations.

According to the update, CSL shares are trading at a 44.2 times price to earnings (P/E) ratio and 29.7 times enterprise value to earnings before interest, tax, depreciation and amortisation (EV/EBITDA) multiples on a forward basis. In the fund’s view, this relative valuation captures its earnings outlook for CSL right now.

However, Yarra did note the growth outlook for CSL’s key plasma products remains “robust”. Although it doesn’t look like it’ll be snapping up more CSL shares anytime soon.

Foolish takeaway

CSL shares have been under pressure in the last month or so. Shares in the Aussie biotech have slumped while the benchmark ASX 200 index has edged 0.6% lower.

While investors hope for a change in fortunes for the Aussie biotech’s valuation, the Yarra Australia Equities Fund looks content to avoid CSL for the time being.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*Returns as of August 16th 2021

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended CSL Ltd. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Healthcare Shares