$300 CSL SOON., page-145

@bedger,

While I'm a shareholder in CSL, I welcome your participation in the stock (albeit on the short side).

The level of complacency that is being imputed into most share prices, especially of market darlings such as CSL, is almost without precedent and is quite concerning, I think.

I don't think people realise [*] the impact the dual extraneous factors of the weaker A$ dollar and low interest rates have had on the valuation multiples of long-duration growth stocks (eg. APA, ARB, ASX, BRG, CAR, COH, CSL, REA, RHC, RMD, SYD, TCL, TNE, etc), and especially those that have significant offshore business activities.

I remember very clearly being able to add to my CSL holdings in recent years when the valuation multiple was in the mid-to high-teens (the last time being October 2016).

And while the broader equity market itself has re-rated upwards in recent years, CSL's valuation multiple premium compared to the broader market is now at unprecedented levels:



Of course, the stock could keep re-rating upwards all the way to the moon, but I doubt it.

Sure, its a premium-to-market quality company, and the market until recently duly considered it to be some 80% better than all the other companies listed on the ASX.

But is it now suddenly almost two-and-a-half times better a business than all the other companies listed on the ASX?

I have to say, I can't see why that should necessarily be the case.

Besides the rate at which its earnings grow faster than the earnings of the broader market (i.e., 10%pa growth vs the market's, say 6%pa-7%pa growth, so an excess growth rate of ~3% pa), I'm not sure how one profits by being long CSL vs the Index.

Perhaps by betting that the relative P/E multiple is going to expand even further?

But that's a game I'm not game enough to play.


[*] Or if they did then they've forgotten it.