Rudi's View | 10:00 AM
Healthcare remains under pressure, and troubled CSL is not helping, but the market is warming yet again to future AI beneficiaries.
By Rudi Filapek-Vandyck, Editor
Investing in the Australian share market continues to be a tricky affair as the number three index weight, CSL ((CSL)), yet again issued a disappointing profit downgrade on Monday morning, alongside a -US$5bn asset write-down.
The share price shellacking on the day takes the pain for loyal shareholders to -74% since August last year.
The last time our eyes witnessed a share price below $100 was back in 2015, when the trend was still very much up.
It's almost hard to believe those shares peaked at $342.75 during the covid-pandemic lockdowns.
Healthcare stocks remain very much on the nose in Australia, as well as elsewhere, and market commentators and sector analysts continue to debate what exactly is happening, and when the trend might turn?
My five cents worth are the sector is now on the wrong side of governments funding the burden of healthcare services, the world around, and the Trump administration in the US is not helping either.
As per always, the dramatic changes in industry dynamics are hitting some companies harder than others, but anxious investors (who have plenty of alternatives available) are in no mood to differentiate.
Thus we witness all of Cochlear ((COH)), Fisher & Paykel Healthcare ((FPH)), Nanosonics ((NAN)), Pro Medicus ((PME)), Ramsay Health Care ((RHC)), ResMed ((RMD)), Sonic Healthcare ((SHL)), and others trading inside a channel of bearish share price trend patterns.
Whether such blanket approach is justified is by the by for the time being. No need to argue with a market that has made up its mind; neither the trend-following traders & algo-robots or disappointed shareholders will change their mind if you do.
If you do own shares in the sector, as I do with ResMed and Pro Medicus, you simply have to bide your time and let the process run its course.
As has also become apparent from last year's sell-all-prior-AI-beneficiaries move, a time will come when the market starts identifying Winners and Losers and which shares have indiscriminately been sold off unfairly and too deeply.
Time to roll out that often quoted piece of investor wisdom from Peter Lynch, one of the truly greats in the industry: know what you own, and why you own it.
ResMed's recent quarterly updates (plural) have been nothing but robust and excellent. Pro Medicus, I agree with many others, remains one of the great growth stories on the local bourse.
But there's no doubt today's shareholders will have to be patient. This process isn't over yet, not while CSL et al continue to surprise to the downside.
As reported after the February results season, CSL is no longer included in my selection of All-Weathers and neither does the FNArena-Vested Equities All-Weather Model Portfolio still have exposure.
Two conclusions automatically come to mind:
-It is never too late to sell
-Imagine trying to sooth the pain through averaging down!
The full story is for FNArena subscribers only. To read the full story plus enjoy a free two-week trial to our service SIGN UP HERE
If you already had your free trial, why not join as a paying subscriber? CLICK HERE