Allan Gray Pounces! Buys CSL After ASX Bloodbath!

Allan Gray has strategically increased its holdings in CSL, Woolworths, and Amcor within its $2.6 billion Australian equities fund. This move comes after a particularly harsh earnings season on the ASX, which saw billions wiped off stock values.

Taking Advantage of Market Downturn

Portfolio manager Suhas Nayak explained that the fund capitalised on the downturn by selling off some of its best-performing assets, including gold miner Newmont and Telstra. The profits were then reinvested in undervalued blue-chip companies that experienced significant sell-offs last month.

CSL's Promising Future: Morningstar's Forecast

Morningstar analysts foresee a positive outlook for CSL, anticipating gross margin expansion driven by efficiency improvements and a limited impact from potential tariffs. Despite market skepticism surrounding the demerger of Seqirus, CSL's vaccines division, Morningstar believes there's a clear pathway to regaining pre-pandemic profitability in Behring, its core plasma division.

Efficiency Initiatives to Boost Margins

The share price currently suggests flat gross margins for Behring. However, Morningstar forecasts a 6% rebound by fiscal 2028, largely attributed to recent efficiency initiatives. These initiatives aim to enhance collection processes, enabling faster donation times and increased collections per donor.

Tariff Concerns Overblown?

While concerns exist regarding potential US tariffs on pharmaceuticals, Morningstar believes the ultimate impact on CSL will be minimal. They anticipate that plasma products will be exempt from tariffs due to their critical need and the potential to inflate US healthcare costs. Even in a scenario with substantial tariffs, CSL is expected to adapt and mitigate the impact.

This strategic move by Allan Gray, coupled with Morningstar's optimistic forecast for CSL, paints a promising picture for the company's future performance on the ASX.