The CSL Limited (ASX: CSL) share price has fallen around 20% since the recent high in November 2021. One fund manager thinks that the healthcare business is an opportunity.
CSL is one of the biggest healthcare businesses in Australia, specialising in developing biotherapies and influenza vaccines.
Ben Clark from TMS Capital was talking with Livewire about the market volatility we've seen recently.
Clark suggests it's a good time to be looking at higher-quality names that have been sold off.
Businesses with "pricing power, strong balance sheets and can grow despite what the economy will do" are the ones to focus on. Clark said to Livewire:
A lot of high-quality growth stocks are down at least 50% since 1 January. They're, arguably, where you want to be in this uncertain environment, in companies that can grow between 10% and 30% regardless of what the economy does.
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Focus on the long term
Clark has a portfolio of names, including CSL, that are viewed as high quality. They include ResMed (ASX: RMD), REA Group Limited (ASX: REA), SEEK Limited (ASX: SEK), Macquarie Group Ltd (ASX: MQG), and Wesfarmers Ltd (ASX: WES).
His advice for nervous investors is to invest for the longer term and not worry about what's happening each week with the ASX share market.
If you're in high-quality growth businesses, you can take a long-term view. If you're in speculative stocks you do need to be worried, because there are a lot of businesses that might never come back.
But try not to react on a day-to-day basis, think truly five years ahead and stick to your plan.
Lower share prices hurt… but they could be opportunities
Understandably, some investors are finding this period a bit stressful. But for Clark, owning businesses like CSL makes it a bit easier to get through this period.
In his opinion, the CSL share price (and others) could recover nicely and grow from here.
Clark said, according to Livewire:
I'm not losing any sleep owning those businesses through this cycle – it's not fun seeing the share prices lower than where they should be, but those companies will be significantly bigger from this point.
CSL expectations
While the company can't make any commitments regarding the CSL share price, it has provided guidance about its expected FY22 net profit after tax (NPAT). The guidance is for NPAT of between US$2.15 billion to US$2.25 billion at constant currency. That includes $90 million to $110 million in transaction costs related to the agreement to acquire Vifor Pharma.
In mid-February, the ASX healthcare share noted that following initiatives it had implemented in its plasma collections network, collections had been improving and were expected to underpin "stronger sales" in its core plasma therapies. Strong influenza vaccine demand was helping Seqirus (which comes under the CSL group).
The acquisition of Vifor Pharma has been delayed. Vifor Pharma is a global specialty pharmaceutical company with "leadership in renal disease and iron deficiency".
CSL share price valuation
According to CommSec, the CSL share price is valued at 36x FY22's estimated earnings.
