Watch CSL ASX:CSL and Woolworths ASX:WOW Stocks

Investors keen on strategic stock picks may find the current market conditions intriguing, with CSL Limited (ASX:CSL) and Woolworths Group Ltd (ASX:WOW) presenting interesting opportunities. Despite facing challenges in 2023, these two stocks might be worth considering for your watchlist. Let's delve into the reasons behind the recent movements in CSL and WOW shares.

CSL Limited's Performance in 2023

CSL Limited, a global biotechnology company, has seen its share price dip approximately 5.0% since the beginning of 2023. The company operates through three key business units: CSL Behring, CSL Seqirus, and CSL Vifor. CSL Behring, specializing in blood plasma products, and Seqirus, involved in flu-related products and pandemic-related services, contribute significantly to CSL's diverse portfolio. Additionally, CSL Vifor focuses on products for iron deficiency and nephrology.

CSL's primary reliance on plasma and blood collections for its operations makes it an indirect play on rising healthcare spending. Despite the challenges, CSL's return on invested capital (ROIC) stood strong at 10.30% in FY23, indicating sustainability for this mature business. With a compounded revenue growth rate of 8.7% in recent years, CSL Limited appears resilient and is considered a blue-chip stock.

Woolworths Group Ltd's Market Position

Woolworths Group Ltd (ASX:WOW), founded in 1924, holds a dominant position in the Australian and New Zealand retail markets, boasting over 3,000 stores and a workforce of over 100,000 employees. As Australia's largest company in terms of revenue and market share, Woolworths operates supermarkets under its brand in Australia and Countdown in New Zealand. The company's diverse operations also include discount department stores (Big W brand) and business-to-business (B2B) brands like PFD.

Investors often turn to Woolworths for dividend income, as the company consistently pays a fully franked dividend, typically yielding over 3%. The key strengths of Woolworths lie in its scale, including distribution and low costs, and proximity, given its 35%+ share of Australian supermarkets.

Share Price Evaluation: CSL vs. Woolworths

One metric investors often consider is the dividend yield, providing insights into shareholder returns. CSL Limited currently offers a dividend yield of around 1.35%, slightly exceeding its 5-year average of 1.24%. This suggests that CSL shares are trading below their historical average dividend yield, potentially indicating an undervaluation.

On the other hand, Woolworths, being a more mature-style business, presents a historical dividend yield of approximately 2.88%, compared to its 5-year average of 2.66%. Investors looking for stable income may find Woolworths' consistent dividend payments attractive.

While dividend yield is a useful indicator, more sophisticated valuation models such as Discounted Cash Flow (DCF) and Dividend Discount Models (DDM) provide a comprehensive understanding of a stock's intrinsic value. Exploring these models could offer a more nuanced perspective on the valuation of both CSL and Woolworths shares.

Conclusion

In a dynamic market landscape, monitoring potential opportunities is crucial for investors. CSL Limited and Woolworths Group Ltd, despite recent challenges, display characteristics that make them worthy candidates for a watchlist. Whether it's CSL's resilience in the biotechnology sector or Woolworths' stronghold in retail, both stocks bring unique qualities to the table, making them worth considering for strategic investments.

FAQs

1. Q: Why has CSL Limited's share price seen a 5.0% dip in 2023?

The article does not provide specific information on the reasons for CSL Limited's share price decline in 2023.

2. Q: What are the key business units of CSL Limited?

CSL Limited operates through CSL Behring, CSL Seqirus, and CSL Vifor.

3. Q: Why is Woolworths Group Ltd popular among investors seeking dividend income?

Woolworths consistently pays a fully franked dividend, usually at a yield of over 3%.