What's going on with the CSL Limited (ASX: CSL) share price?
The S&P/ASX 200 Index (ASX: XJO) has had another phenomenal day. By the market's close, the ASX 200 was up 2.24% to 6,144.9 points, decisively breaking through the 6,000-point mark that it flirted with last week.
Most ASX blue chip shares performed strongly today. The ASX banks surged, as did Woolworths Group Ltd (ASX: WOW), BHP Group Ltd (ASX: BHP) and Telstra Corporation Ltd (ASX: TLS).
But something's missing here – CSL.
That's right, as the ASX 200 rallied, CSL has been left in the dust. By the end of the day, CSL shares were down 2.39% to $278.50. As the largest ASX company, CSL has the heaviest weighting on the ASX 200 index. And as such, this underperformance sticks out like a sore thumb.
So what's happening?
CSL share price continues to underperform
Two weeks ago, I wrote about how CSL shares were lagging the market. Since then, CSL shares have fallen another ~6%, while the ASX 200 has rallied over 9%.
Not even the news that CSL has made a new acquisition today could get investors on side.
But I think an examination of what's really been going on with CSL shares this year can shed some light.
Below, we have a graph of the ASX 200 index – represented here by the iShares Core S&P/ASX 200 ETF (ASX: IOZ) over the past 6 months.
And here we have a graph of the CSL share price over the same period:
As you can see, the CSL share price was something of a safe haven for ASX investors over March and April. Between 20 February and 23 March, the ASX 200 index fell over 36%. By contrast, the CSL share price 'only' fell by around 16% over the same period.
What's next for CSL?
You might be thinking it's a great time to buy CSL shares today. And if you're an ultra long-term investor, I would back you up. Before the coronavirus pandemic, CSL shares were perennially at all-time highs. Investors seemed to see any hint of a dip as a chance to 'pick up a bargain'. And this strategy worked well.
But today, I think the market is starting to realise that even great companies like CSL can't be priced at 'growth company' levels forever. CSL is a behemoth now with a market capitalisation over $125 billion. I do still think CSL has a lot of growth in its future but, with a price-to-earnings ratio of 45, I don't think it has the ability to bang out the high levels of growth the market seems to think is still possible.
As such, I wouldn't be surprised if the CSL share price continues to underperform the ASX 200 going forward.
