Rudi’s View: Dissecting The Next Share Market Rally

Always an independent thinker, Rudi has not shied away from making big out-of-consensus predictions that proved accurate later on. When Rio Tinto shares surged above $120 he wrote investors should sell. In mid-2008 he warned investors not to hold on to equities in oil producers. In August 2008 he predicted the largest sell-off in commodities stocks was about to follow. In 2009 he suggested Australian banks were an excellent buy. Between 2011 and 2015 Rudi consistently maintained investors were better off avoiding exposure to commodities and to commodities stocks. Post GFC, he dedicated his research to finding All-Weather Performers. See also "All-Weather Performers" on this website, as well as the Special Reports section.

Rudi's View | May 24 2023

By Rudi Filapek-Vandyck, Editor

Dissecting The Next Share Market Rally

Despite all the ups and downs, the noise, the tribulations, the angst and intermittent periods of violent market volatility, the share price of Australia's largest biotech, CSL ((CSL)), is effectively unchanged from three years ago.

Whether this is a positive, or not, depends entirely on one's views on markets, investing and what likely follows next.

My personal view is that CSL's sidetracking since 2020 is almost entirely explained by the macro forces that have since dominated global equities; from covid, to lockdowns, to the outbreak of inflation, and the subsequent major reset in global bond yields, including the post-lockdown recovery trade and this year's economic slowdown.

Throughout the fog of today's slow-moving share price stasis, I see a long-term wealth generator whose valuation and operational momentum are once again aligned for a break-out to the upside, exact timing unknown.

Within this context I note CSL shares have risen circa 24% from January last year, and they are up 5.8% in 2023 thus far (last Friday).

Taking into account company-specific dynamics, the share prices of a number of healthcare stocks on the ASX do not look fundamentally different from CSL's trajectory, again emphasising the all-dominant macro influences for the sector throughout the past four years.

History suggests periods of relative stability in the CSL share price do occur, on occasion. It happened between 2002-2006, with the global industry oversupplied, and again from 2008 till 2012.

The latter period was quite impressive as it includes the GFC meltdown. Most importantly, both periods of stability saw the share price subsequently rally to fresh all-time record highs, and beyond.

The combination of all of the above suggests today's set-up could well turn out very favourable for patient shareholders and newcomers.

To add an extra cherry on the proverbial cake, most healthcare sector analysts seem to agree with that positive view, as are a number of investment strategists across the financial industry locally.

Having closely observed the Australian share market for more than two decades, I cannot recall ever seeing CSL popping up in as many Model Portfolios and Conviction Buy Lists as is the case this year.

CSL share price 2020-2023 (May 22) - source: ASX.

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