If you're buying S&P/ASX 200 Index (ASX: XJO) shares, you'll have noticed some unwanted headwinds blowing out of the United States recently.
Those headwinds come courtesy of United States President Donald Trump.
As you're likely aware, Trump has been slapping sizeable tariffs on his nation's biggest trading partners, including China, Canada, Mexico, the European Union and, yes, Australia.
Fears of a broadening global trade war have pressured global stock markets, sending the ASX 200 down 8.1% in a month.
And investors have been fairly indiscriminate in their selling, even pressuring ASX 200 shares with strong earnings and outlooks.
While that may cause some short-term pain for shareholders, it also creates an opportunity to buy quality, oversold companies.
"For the first time in a long time, it seems valuation matters," said Phil Cornet, a portfolio manager at Atlas Funds Management Australian Equity Income fund.
Asked about the recent ASX 200 sell-off, Cornet said (courtesy of The Australian Financial Review):
A sell-off forces investors to ask what is the right price? Good stocks are and will be caught up with overvalued stocks in the sell-off, which creates great opportunities for investors.
Stocks with solid earnings and strong balance sheets that pay regular dividends will endure and will be sought after when the calm returns.
An undervalued ASX 200 share
As for the most undervalued ASX 200 share his fund holds, Cornet named biotech stock CSL Ltd (ASX: CSL).
"CSL's share price has fallen 20% over the last six months despite selling largely non-discretionary lifesaving biotherapies," he said.
(At the time of writing, CSL shares are down 16% over six months.)
"We have been surprised at the sharemarket weakness after the company reported solid profit growth and a nice 16% increase in the dividend courtesy of a weaker Australian dollar," he added.
According to Cornet (quoted by the AFR):
The market ignored a typically good result from CSL's key immunotherapy business and an improvement in the oft-critiqued renal acquisition Vifor and instead focused on a soft flu vaccination period in the US earlier this year.
Atop its strong profit growth forecasts, Cornet is also bullish on CSL shares due to the company's relative immunity to Trump's tariff campaigns.
Cornet noted:
With management guiding to 10% to 13% profit growth in 2025 and the company selling a product that will have limited to no impact from Donald Trump's tariffs, CSL's current share price looks to be an attractive entry point.
And the ASX 200 share should catch some tailwinds from the weak Aussie dollar.
"The fact that it is an offshore earner is also appealing, given the weakness in the Australian dollar," Cornet concluded.
