Why you’re better off if CSL crashes, even if you already own it

The iron law of investing is that every stock is a claim on a future stream of cash flows. It follows, then, that the price you pay and the return you get are two sides of a seesaw. As your purchase price decreases relative to the future cash flows, your return on investment goes up.Plasma products maker CSL (ASX: CSL) is Australia’s largest healthcare company and has barely put a foot wrong in 10 years. Those who bought the stock when Share Advisor first upgraded it on 20 Jan 2010 (Long Term Buy – $31.30) have earned a 236% return...

The iron law of investing is that every stock is a claim on a future stream of cash flows. It follows, then, that the price you pay and the return you get are two sides of a seesaw. As your purchase price decreases relative to the future cash flows, your return on investment goes up.

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