What’s Behind CSL Ltd’s 31% Climb in 2017?

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One of the best performing stocks on the ASX 200 has been CSL Ltd [ASX:CSL]. The stock is up 31% year-to-date, with even more room to grow in 2017.

What makes CSL’s price climb even more amazing is their size. The company has a market cap of $59.7 billion.

The biotech behemoth is the leading manufacturer in the US$24-billion blood plasma industry. They also develop and improve various medical products and vaccines.

What has led to such amazing growth for the CSL Share Price in 2017?

The company got off to the right start by upgrading their profit early in 2017. CSL stated:

Following strong sales performance, particularly by immunoglobulins and speciality products in the most recent financial quarter, CSL expects to report NPAT [net profit after tax] of approximately US$800 million for the six months ended 31 December.

And when figures came out on 15 February, CSL even beat their upgrade. Profits totalled $806 million, increasing earnings per share by 14%.

But is this responsible for the 31% share price rise?

Not on its own. A contributing factor has also been the drove of investors moving into passive funds. According to The Australian Financial Review:

Despite total assets at BlackRock climbing to a record $US5 trillion over the past few years, their clients have been taking money away from their active managers at a fair pace.

At the end of 2013, the manager had $US317 billion that was actively managed. That’s now shrunk to $US275 billion despite the Dow Jones rising 25 per cent.

It’s a different story for the robot-backed, low-cost funds. They have been growing like topsy.

In the US a record $US429 billion flowed into index funds in 2016, pipping the previous record of $US423 billion set in 2014.

A bigger factor pumping up demand for CSL stock has been share buybacks. This has reduced the number of overall outstanding shares, and improved per share metrics.

As at its FY17 half-yearly announcement, CSL’s $500 million buyback scheme was 11% complete. And the stock could likely continue its climb if all else remains the same.


Härje Ronngard,

Junior Analyst, Money Morning

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