Very much so Adam, the general direction of CSL is what interests me, rather than beating analyst forecasts. I thought the net debt/ebitda (2.7 to 2.2), revenue growth (11%), NPATA EPS (11%), R&D growth (12%) all looked good and continued the pleasing outcome of the first half. It also felt to me that the rate of improvement appeared similar to H1. Management’s assumption that this growth rate should continue over several years, and reasonable current valuation, also gave me added confidence. So, on balance our family increased our holding in CSL by around 30%.
I haven’t posted on HC much lately, as my investment style has evolved over the last several years. No longer am I trying to flip holdings after a few years and beat the market. We are looking for a group of companies that we can hold like an index fund and add to selectively. Despite outperforming the ASX accumulation index over the past 11 years, we have underperformed the unhedged SP500 and probably performed similarly to a 50/50 index split like VAS/IVV. Not to mention the associated CGT. Instead, today we hold around 60% of our funds in low-cost index funds and 40% in specific companies. For that 40% I am looking for companies that are vaguely good. My feeling is that most companies either fall into vaguely good, neutral or vaguely bad as an investment opportunity. CSL is in the vaguely good category in my opinion.
Perhaps this idea is boring and lacks conviction, but it has been working well for us and has reduced the associated stress around investing. Whole market falls don’t really bother me, but I feel sick in the stomach when I open my account and a holding has justifiably fallen 40% that day on terrible news, often which the company will never really recover from. Now I am trying hard to not do anything stupid. CSL may outperform or underperform the market from here, though on balance I think it has a better than even chance of outperforming the market and with less than average volatility. These are the kinds of investment opportunities that I am searching for now, i.e. low volatility, reasonable value with a narrower set of outcomes, though it always amazes me when stockbrokers say CSL is worth $319.21. Their range of outcomes must be much narrower than mine!
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