Yeh i thought it was a very poor article and probably written more for marketing purposes to create angst. Agree @Goldfish he should have written it 5 years ago - he would've been wrong on the EPS but might have been right on the total return - as you saw rear view mirror.

Personally I think his EPS growth assumptions, especially in his bull case, is wrong but I guess time will tell if that is true or not.

@Goldfish and @Mujo I'll humbly go into bat for Chris Leithner here. He writes some long articles but thats usually because there is a lot of evidence and data to support his thinking, rather than most commentators who offer opinions or forecasts alone. I haven't invested with him but he has beaten the market by a bit for over 20 years and does better in below average years.

On CSL specifically here is the tale of the last 10 years, when it comes to ROE and ROC.

This is not a recent trend...it's 10 years now where the company has a declining rate of return on every $ of capital being used each year. In relative terms compared to market they are still OK ratios but the facts we have suggest CSL is struggling to get the growth they used to. So, unless they pull a new growth model out of the hat soon, the market is likely to derate the multiple from a growth company to a defensive company.

I have no expertise at all in their industry to know whether they have a new double digit growth driver that's likely to work but I'd suggest if you plan to keep holding for a long time, you'd want a positive view on that playing out.

IMHO the growth model is the old growth model with the core Behring being key. The new growth areas with Seqirus (lesser extent but still with the mRNA shift) and then (mostly) Vifor is what has got them into strife.

Yes Behring as disrupted with COVID from 2020-2022 so part of the poor business performance in the FY21-FY23 was related to that with lower margins etc. Projecting based on those years is looking in the rear view mirror.

Just out of curiosity what does his fund/company actually invest in? Finding it hard to work out - I assume it's not just long ASX names? Is there a way to get long term performance too?

Microsoft Word - Performance History - Update Sep24

Stepping back from the logic a bit - or the numbers - and just trying to feel the "vibe"... CSL Seqirus is a major global influenza vaccine provider and a leader in pandemic preparedness, developing and producing influenza vaccines (including cell-based and adjuvanted vaccines) and partnering on pandemic response efforts... and we have a vaccine sceptic in charge of the US Department of Health and Human Services (HHS) so RFK Jr is now the top decision maker at:

• the Centers for Disease Control and Prevention (CDC),
• the Food and Drug Administration (FDA),
• the National Institutes of Health (NIH),
• the Office of the Surgeon General,
• the Indian Health Service,
• the Agency for Toxic Substances and Disease Registry,
• the Health Resources and Services Administration,
• the Substance Abuse and Mental Health Services Administration,
• the Administration for Strategic Preparedness and Response (ASPR),
• Advanced Research Projects Agency for Health,
• the Administration for Children and Families (ACF),
• the Administration for Community Living (ACL), and
• Centers for Medicare & Medicaid Services (CMS).

[Source: https://abcnews.go.com/US/rfk-jr-nominated-hhs-secretary-agencies-overse/story?id=115894410]

Earlier this month (March 2025), the FDA cancelled the planned meeting to update next season’s flu vaccines, at the direction of RFK Jnr. (link)

So, in terms of the "vibe", I think RFK Jr and the new direction he is taking the CDC and FDA in, is a major reason for the sell-off in CSL over recent weeks.

Kennedy says he won't stop vaccines being available, however he wants information about the risks of vaccines widely distributed to people, particularly at locations where vaccines are available. His meddling with the way the FDA works with companies like Seqirus to choose the most appropriate strains of flu to target with vaccines (as demonstrated by that meeting being cancelled) is a sign that it is going beyond a "balance of information" agenda and is going to directly impact how many vaccines are actually manufactured and distributed. Sure, Seqirus is just one division of CSL, and the USA is just one country that they service, but it's the BIGGEST country, and rather than assume that the market has, in its usual fashion, overeacted to the downside, imagine, just for a microsecond, that it gets worse from here.

We already know that the backlash that Republican pollies are getting at their town hall meetings with constituents in relation to the mass-sackings of federal government workers by Musk's DOGE (department of government efficiency) is being largely ignored. First Trump was telling them to ignore all vocal dissent as those people were all paid actors planted to disrupt the meetings, and now he's telling them to stop having town hall meetings altogether, so just ignore the constituents - don't meet with them, and don't reply to their letters.

It seems highly unlikely that Trump can get the American Constitution changed to allow him to run for a third term, because changing that two-term-limit that is enshrined in the constitution would require an amendment that would need to be passed by two-thirds of both houses of Congress, then ratified by the legislatures of three-quarters of the states (38 out of 50 states). Even with a stacked judicial system, including the US Supreme Court, that's going to be a very hard ask, particularly when so many 2nd term Trump voters have already got "buyers regret".

So, on the assumption that he only has 4 years to complete his agenda, it would appear that he has promised whatever he thought would get him elected (which worked) including stuff he fully intended to do - like tariffs and slashing foreign aid and halving the government workforce - and stuff he knows he can't do, and doesn't really care about, like the price of eggs (getting household grocery bills down, reducing inflation). Additionally, he shouldn't care about his own popularity so much this time around, because he doesn't have to worry about polls - he can't be removed during this term except by impeachment - and he has the numbers to block any attempts to impeach him - and he can't run again anyway in 2028, so what the American people think of him between now and then doesn't impact him at all, other than his own ego, and perhaps we shouldn't underestimate the importance of that ego. And what people think of Elon Musk and RFK Jr sure as hell doesn't bother Trump - I think he actually loves it when Musk is copping a heap of flack. Sadistic pleasure.

Point is - he warned us that he would let RFK Jr "go wild", and I'm sure he meant it too.

Further Reading:

Fact-checking RFK Jr's views on health policy [16 November 2024, BBC Verify team]

US Senate Finance Committee Ranking Member Ron Wyden Slams RFK Jr.'s Failure to Answer Basic Questions on Vaccines: https://www.finance.senate.gov/chairmans-news/wyden-slams-rfk-jrs-failure-to-answer-basic-questions-on-vaccines [31-Jan-2025]

https://www.nbcnews.com/health/health-news/kennedys-confirmation-will-breed-harm-good-public-health-experts-say-rcna192124 [14-Feb-2025]

Excerpt:

Kennedy has also expressed interest in pausing research on infectious diseases like Covid and measles for the next eight years, which experts said could further prevent scientists from being prepared for future pandemics.

“It’s a sad day for America’s children, and for the health of our nation, when a science denialist and anti-vaccine activist is chosen to head HHS,” said Dr. Paul Offit, director of the Vaccine Education Center at Children’s Hospital of Philadelphia.

@Mujo I'm pretty sure it's mostly ASX longs but they also do some bonds/cash etc when they don't see value ala Berkshire.

Thank you for your thoughtful responses everyone.

I also fall into the camp of this being an incomplete analysis based largely on math, though Chris does say in response to one of the comments on the article that he is not looking to speculate on business forecasts, as neither me or anyone else can reliably know that.

There is no doubt that CSL will struggle to replicate its growth and returns on invested capital of the past couple of decades. I don't think that is the nub of the issue at hand though - the question is has the price fallen sufficiently to reflect the diminished growth and return prospects of a larger and more mature business (not allowing for their ability to create products and lines of business that can reignite higher growth)?