Confession time; I spectacularly blew my chance to add blood-product (and soon to be major flu vaccine producer) CSL Limited (ASX: CSL) to my portfolio last year.
After watching the company ride higher and higher all year, the company's share price dipped briefly to $95 in December.
But I was greedy.
"At $90, this will be a real steal", I thought.
The share price never made it to $90, quickly changing course and hitting a high of $143 in June this year. Them's the breaks.
In desperation I went on a hunt to find "the next CSL" (as one does). I thought that Fisher & Paykel Healthcare Corp Ltd (ASX: FPH) could fit the list. The company has great long-term growth prospects, fantastic returns and thoughtful research and development reinvestment levels reminiscent of CSL.
Eyeing up those big returns
Still, with the CSL price easing back over the last few weeks I'm keeping a sharp eye on the company as we head into earnings season because there is still an awful lot to like.
For starters, there's the almost 50% return on equity CSL produced in 2016.
I love the return on equity (ROE) metric because it can be broken down using DuPont analysis to identify how the return was generated. In CSL's case a big driver of the return is because the company funds its operations with a bunch of debt, leveraging returns for investors.
Being mindful of risk
Still, CSL is not without its risks: product quality and brand reputation are fundamental to CSL's continuing success while competition from pharmaceutical and biotech companies has been sneaking up in one of the haemophilia products it sells in particular. I'll be keeping an eye on this when the company reports this month.
Foolish Takeaway
My missed opportunity last year has kept CSL high on my watch-list and I think the prospects for the company have only improved since then. It may not come close to my previous $90 price anchor, but I'll be watching closely for an opportunity to add it to portfolio if the share price retreats further.
