CSL shares up 15% in 5 weeks amid two hedge funds placing opposing bets

Let's see what these funds have to say about CSL shares.

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The CSL Limited (ASX: CSL) share price is trading at $264.35, up 0.07% in midday trading on Tuesday.

The S&P/ASX 200 Index (ASX: XJO) is down 0.8%, as the market awaits the Reserve Bank's final interest rate decision of the year.

CSL shares have had a tumultuous time in 2023.

The healthcare giant hit a four-year low of $228.65 per share on 30 October.

The CSL share price has rebounded 15% in five weeks, but ultimately, the market blue chip is still down 6.2% in the year to date. This compares to a 1.7% bump for the S&P/ASX 200 Index (ASX: XJO) in 2023.

Hedge funds place opposing bets on CSL shares

Today, we learned about the different views held by two hedge funds on CSL shares.

They've both got conviction in their opinions because they've either made recent trades or continue to hold the stock accordingly.

As reported by the Australian Financial Review (AFR), a Perpetual Ltd (ASX: PPT) long/short fund managed by Anthony Aboud recently exited a short position on CSL shares. In addition, Perpetual's concentrated equity fund and long-short Share Plus fund, also managed by Aboud, are underweight on the stock.

Meanwhile, Pendal's Australian long/short fund run by Jim Taylor remains overweight on CSL shares. They've committed 7.3% of the fund to the ASX 200 healthcare share. In addition, Pendal's long-only Horizon Sustainable Australian Share Fund also holds a 9.3% stake in CSL shares.

What is Perpetual's view on the CSL share price?

In a recent note, Perpetual discussed an earnings downgrade for CSL that led to a weaker share price in October. It's also concerned about competition for CSL's drugs and other treatments.

One example is a drug called Vyvgart Hytrulo, developed by Netherlands-based competitor, Argenx SE.

The drug is intended to treat chronic inflammatory demyelinating polyneuropathy (CIDP).

CIDP is a rare autoimmune disease. It's a neurological disorder that damages the protective sheath covering nerve endings. The result is weakness, tingling, and loss of sensation in the arms and legs.

Perpetual thinks Vyvgart Hytrulo could impact demand for CSL's IVIG drug.

The fund said:

Amongst other things, an injection of Vyvgart Hytrulo takes just 30 to 90 seconds versus a one-hour infusion of IVIG.

With CIDP making up 25 per cent of IVIG sales for CSL Behring, we think this presents some risk to the company's earnings and longer-term growth of IVIG.

What is Pendal's view?

Pendal isn't convinced that Argenx's drug is a big challenger to CSL yet. In a recent note, the equities team said Vyvgart failed to treat a rare bleeding disorder in a trial.

The CSL share price lifted on the news.

The fund said:

[The trial] raises questions around the mechanism of action and how well this class of drugs is understood. This diffuses some of the competitive concerns facing CSL, in our view.

Why are CSL shares down in 2023?

Morgan Stanley analyst Sean Laaman attributes CSL's lacklustre share price performance to "recovery to pre-pandemic plasma GM in FY26-FY28 has been slower than we anticipated, FcRn disruption in CIDP possible in FY25, and generic competition nears for V4's Injectafer in Europe".

There has also been market nervousness over recent news that Ozempic, which treats diabetes and obesity, may be an effective treatment for chronic kidney disease (CKD).

That could be a problem for CSL, given its $18 billion acquisition of CKD business, Vifor just two years ago.

Motley Fool contributor Bronwyn Allen has positions in CSL. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended CSL. The Motley Fool Australia has recommended CSL. 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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