Fund managers are reportedly renewing their confidence in CSL, just months after the health giant experienced one of the market’s largest write-downs and downgraded its profit outlook. This period of widespread pessimism saw the company’s share price slump, but Australian active fund managers have recently embarked on a significant buying spree. CSL, a blue-chip health giant, focuses on plasma products, which constitute its most important business, and also operates a kidney treatment subsidiary. It is now the top-held position among a cohort of 62 local investors tracked by Morgan Stanley.
The shift in investor mood follows CSL’s shares falling below $100 to a nine-year low in May. However, a change in leadership and a restored sense of urgency within the executive ranks, particularly concerning its crucial plasma products business, have contributed to a notable recovery. Shares in the company, which originated as the Commonwealth Serum Laboratories in 1916 before its privatisation in 1994, have more than doubled from a low of $90 in early June, now trading above $180.
Neil Margolis, who oversees $1 billion for Merlon Capital’s Australian equity fund, began accumulating CSL stock when it was around $140, though he was initially caught out by numerous broker downgrades. Margolis noted that “quant funds are making everything more sensitive to short-term earnings revisions,” leading to an exaggerated focus on avoiding downgrades. However, when CSL’s share price reached $90, some analysts started upgrading earnings forecasts, reportedly catching quant funds off-guard who were largely positioned underweight.
Earlier in May, CSL experienced a nearly $10 billion wipe-out in its market value after outlining impairments largely tied to its Vifor kidney treatment subsidiary, which it acquired in 2022 for $16.4 billion. The company had warned of several issues impacting its profits, with analysts describing the forecasts as a “kitchen sink downgrade.” CSL had initially announced US$1.5 billion in write-downs earlier this year, followed by an additional US$5 billion (A$7 billion) in May.
