Excellent summary @mikebrisy

If it is Apnimed that’s worrying the market, to date Mick Farrell has stated it shouldn’t be. I guess he would say that, but if he was truly worried I’d hope the ResMed Board is having a serious conversation about trying to buy them at a sensible price, to ensure ResMed remains the go to option whatever treatment a patient needs.

And given the sharp sell off in recent months, ResMed is now on a trailing multiple of around 17. That’s about 15% less than the market average, so I’m not even sure we need growth to continue at recent rates to do well from here over the next 5 years. A growth rate anything north of 5% is probably enough to beat the market from this point in my view.

Yes, the market is pricing this as if it will hardly grow, or slowly die out - while a moderation in long-term assumptions seems reasonable/prudent, I am not sure the situation is as dire as the market is implying.

You have to wonder if there's a bit of contagion going around - COH, then CSL, so the thought in some minds might be: Surely RMD's next.

There is no doubt an element of that as well. The sentiment in the sector at large has been dire.

I own RMD and CSL, not COH. I don’t think any of these scream bargain just yet on the foreseeable metrics. Forecast ROE based on earnings consensus out to FY27/FY27 are: RMD 27%, COH 17% and CSL 15%. Looking forward BHP is likely to have a higher ROE than COH or CSL at 20%-25%.

Looking at valuations assuming the metrics don’t change, RMD looks the best value with a 12% ROI at the current share price, then CSL with a ROI of 11%, and then COH at a 7% ROI.

BHP at $65 looks expensive, but if the copper story continues, it could still return investors 10% ROI at the current share price. I’ve been a seller up here though. Even RMD looks like a better option, higher ROE and not as cyclical. Structural issues could be worse though for RMD if the GLP-1 drugs threaten the future. I put this in the unknowable category at the moment. I’m not aware of data to show a negative impact yet. Is there any??

Held: BHP, CSL and RMD

@Rick there's no data yet to indicate that GLP-1s and AD109 are actually negatively impacting $RMD CPAP sales.

On the contrary, $RMD's real world data indicates that GLP-1 use increases likelihood to go on CPAP and to stay on it. This database now has millions of patients and spans over 3 years.

AD109 is not yet approved, but appears likely to launch in 2027, based on strong published data from the Phase 3 registration trials.

There is unambiguous, clinical data that both GLP-1 and AD109 have a significant impact (order of magnitude - 30% to - 50%) reduction of AHI in mild to moderate OSA, and data indicating the drugs can lower severity of OSA by one severeness category.

In the short to medium term, it would appear that standard of care will remain CPAP or CPAP in combination with GLP-1, where obesity is a factor.

Once AD109 enters the market, and we start to get even more data on the benefits of different therapies and combinations of therapies, the picture will evolve. But I have no way of predicting how this will play out, and I haven’t read any compelling views on this, beyond people making assumptions. So this process will unfold for another 3-4 years.

Accordingly, different market participants (analysts etc.) are taking different views on the long-term impact on $RMD sales and company value. One indicator of this is that the spread of broker price targets of US$180 to US$340 (mean US$270 vs current SP US$186) has never been wider. My interpretation of these numbers is that at the moment the Market is firmly in the Bear camp.

I agree with you in that we cannot know how this will play out and I have decided to weight my decision (for now) on how operational performance pans out, while keeping an eye of the long term market drivers. At the moment from my perspective, these factors remain balanced and undecided whether to upside or downside overall.

Healthcare sector, driven by the US, is generally down in the dumps and there are the other company-specific considerations I listed earlier. However, what distinguishes $RMD from $COH and $CSL is that the latter two have faced material, short-term performance issues. Operational performance at $RMD has seldom been stronger.

So my conclusion is that sectoral drag is amplifying the structural concerns of GLP-1/AD109 etc., creating the situtation where $RMD is undervalued given a risked view of the uncertainties as to how these factors will play out.

And that's why I am a HOLD on $RMD, because I have an adequate portfolio weight (now 8.3%, ASX RL)

Disc: Held

P.S. Well done on BHP. I hesitated when it last got down below $35, (or $RIO near $100) ..., both on the copper thesis, and missed my opportunity!

@mikebrisy I agree the health sector and GLP-1/AD109 anxiety is putting some pressure on the RMD share price. I’ve been adding a few small lots lately at just over $26. It’s fair value for a great business. Currently holding 2.5% RMD IRL, so happy to grow this holding at $26 or below.

I don’t think there was anything particularly clever about holding BHP until $65. We had a large holding and I’ve been slowly selling above $50 taking advantage of the strong chart. Then I revalued the business and realised it could still return 12% at around $50. I would likely add shares below $50 if there was a market opportunity.

@Rick we are not alone. The following is a post from X this morning by Rudi Filapek-Vandyck:

"Ord Minnett has reviewed its ResMed (RMD) model following recent strong test results from Eli Lilly’s new experimental weight-loss drug, Retatrutide and a broader assessment of the impact of glucagon-like peptide-1 (GLP-1) products on the company’s business.

"Overall, we conclude the market is discounting a far more negative scenario in the share price than is ever likely to happen, i.e. it assumes 60% of CPAP users classed as obese and 75% of users classed as overweight stop using their machines in favour of GLP-1 drugs. 

"This would equate to mask and accessory sales in the key US market falling by half in FY28, in turn driving a 30–35% fall in EPS over the longer term.

"We concede weight-loss drugs will reduce ResMed’s total addressable market (TAM) over the medium and longer term, but investors are pricing in a very unrealistic outcome at current stock levels, in our view, noting high levels of non-compliance with GLP-1 routines.""

… although silent on the impact of AD109.

According to my BA, Ord Minnett currently has a price target for $RMD of $43.70, so I guess they are feeling just a little out of synch with the marke!

After looking dire for a while, the recent price action is a nice break of the downtrend. Still below the 200DMA of course, so the primary trend is still down.