It can take a while for down-swings to be exhausted (Just think about all those holders pouring over their charts and seeing a "sell" signal!). I patiently have my second top-up bite waiting at $28.50. Its getting close! I'm happy to wait.

Didn’t expect such a divergence. US securities ended up more than 4%. I know some of the differential is due to currency movements, but we’re down 2.50% here, which seems like a big swing. Maybe a bit of catch up from the US drop on Friday.

Btw, I am enjoying your generous sharing of all the outstanding research you do @mikebrisy (I know I have said something along these lines previously, but it bears repeating).

I am on much the same page with regard to the current state of play with RMD, even though I have regard for TA and have increasingly incorporated it into my investment process over the years - when a high quality company stumbles, it's best to ignore the charts in favour of the fundamentals and outlook over the long term. Even here though, charts can help you identify points to enter e.g. selling exhaustion, signs of institutional demand coming in etc.

I am also inclined to believe Mick when he says margins will improve - he and the company have earned that kind of benefit of the doubt.

Well, the market sure did oblige, and for the first time in many years, I added to my position today. I didn't get the best price as I had a crazy day at work and couldn't adjust my order, but it won't matter either way in the fullness of time.

Damn! @mikebrisy Amazing response…!

The tailwind, I really see, is exactly what you’ve pointed out. Healthcare is rapidly becoming an Arms race in terms of data it always has been to a great degree, knowledge is power (and money), I work in the industry (different specialty) and treat patients.

They are establishing themselves as the market dominant player with the number of cloud connected devices and proprietary data that will ride on top. I agree the valuation prices some of this in, but it’s hard to ignore that great businesses almost always look expensive.

I’m actually hoping the share price gets hammered with a market overreaction to the downside. On my watchlist to enter a position with a long-term hold in mind. Certainly the respiratory physicians I know, still view CPAP as the gold standard treatment for apnoea, and if optimised further with proprietary data then alternatives, such as somnomed have a very long and difficult runway to take significant marketshare.

I agree. My val ahead of the result was $37, and if I eyeball a weaker %GM for 1-2 years, I'd probbably come back to closer to $36.

Interestingly, the GS research note only has revenue growth CAGR for next 3 years of 9% (Last 4-year CAGR has been closer to 13%, assisted by Phillips, obviously). True, its a large base now, and we will see Phillips return at some stage and competition heat up. But they are continuing to invest 7% of revenue in R&D and Mick spoke of improved masks coming out in FY24 (that he's been trialling at home), and we are yet ro see the full power of AirSense-11 sales and margin. Mick also reminded us that in different regions they already face strong regional competitors and that Phillips has not been out of all markets, albeit the US is the largest. He disclosed this as part of the explanation as to why they hadn't been able to pull the pricing lever too hard, as part of his defence of the %GM story.

Just to put in context, on the GS numbers, they hit a p/e = 23 in FY26 at today's ASX SP, and given all the health issues their products assist with and the global market, there is no way I believe the growth story is done by FY26. Their "aspirational target" of treating 250m patients by FY25 looks stretchy now, but the global addressible market across the various conditions is still c. 1 billion people, with many being "conditions of affluence", concentrated in developed markets. In some cases developed market incidence being 2-3x that of developing markets.

So I see the GS 9% revenue growth CAGR as very do-able and its lower than me at 10%. I also assumed Phillips would be back by now. They still have more demand for AS-11 than they can meet, so I believe there is a significant revenue upside risk in the short term. Mick said AS-11 would remain on allocation for a few more quarters, which means that they should be able to meet full market demand at some time during FY24, which means it should contribute strongly through FY25 for the full year.

So, where I've landed, is that I will hold my current allocation if ASX stays flat on Monday, and wait until I review my allocations and valuations across the portfolio in early September (lots more results for nearly all my larger holdings yet to come in). But if ASX follows NYSE down another 9-10%, then I will increase my allocation. The returns and risk profile from my perspective becomes compelling if the SP dips down into the $27.00-$28.00. I don't have any scenario that leads to that valuation, short of a shock, like a product recall. (Important to remember that this can happen, and they are not that infrequent in medical devices! I don't model that risk, but manage it via my strict position size limits.)

The near term risk I see is that 1Q will be softer on revenue (due to their seaonal trend) - I think that is understood by most analysts. More significant will be if they have not made any progress on operational levers over the next 90 days, then it starts to look like a downgrade cycle, and the research notes could start getting bearish. So you have to be prepared to accept the short term risk. I think there is a real risk this could happen. $RMD was a bit like $CSL in that a narrative has been building this year which has supported a very bullish sentiment, Yesterday's result pricked that bubble, somewhat. And any further bad news may turn the narrative in the other direction. Of course that's all noise and nothing to do with the underlying business, but it gives me pause for thought to think about when the best buying opportunity might arise.

Assuming RMD.ASX follows what happened on the NYSE (which it should considering it's the same company just different listing), then at the market cap that it closed on overnight on the NYSE it equates to an ASX share price of around $27.28.

This puts it on a trailing PE (based on FY23 numbers) of almost exactly 30x. According to what I'm seeing using TradingView, the PE of RMD hasn't been below 30x since 2017 albeit earnings have tripled from 2017-2023.

Definitely one for the watchlist as a long-term quality compounder in a defensive sector. If there is an overreaction to the downside, I think it would be a company to slowly allocate into and leave it in the bottom drawer for the next 3-5 years.

Disc: Not Held.

@mikebrisy your analysis as always is very insightful.

I have been researching Resmed off and on for a few weeks, and must admit I have somewhat fallen in love with the company, especially its evangelist CEO Mick Farrell.

I was fully expecting a surprise on the upside in its latest results announcement, given its main competitor has been absent from the market for 18 months, so initiated a position in my RL portfolio the day before. Doh!

The market reaction to an 18% YOY increase in revenue and 17% increase in EPS (or only 7% increase non-GAAP) is overblown in my view. Lots of nitpicking about a couple of percentage points decline in gross margin, despite the fact that this is readily explained by the increased percentage of lower-margin Airflow 10 devices in the sales mix, and by the higher material and freight costs that are baked in to the inventories of these devices.

I topped up my position at a 10% discount on Friday, and am now locked and loaded for the next 5 years +. I'm not expecting any meaningful gains in the short term, but with the company achieving revenue CAGR 13%, operating income (non-GAAP) CAGR 15% and EPS (non-GAAP) CAGR 15% I see this as a pretty dependable long term investment.

I really think Ozempic is probably the bigger “threat” to ResMed than Phillips at this point.

All the players are gearing up to release seemingly highly effective weight loss drugs (side effects and durability of loss will determine winner so long road yet). But I don’t see it impacting substantially for another 3-5 years at least. The world will probably get heavier/older meanwhile.

Coincidentally Frazis’ latest investment memo talks about a small company call Inspire Medical Systems which is apparently logging growing sales. I haven’t looked into it but sounds like a surgical/ implanted device.

Excellent analysis as usual @mikebrisy. The level of detail you go into and the clarity with which you articulate your views is a sight to behold!

As my largest holding, the steep fall on Friday (with the expected follow up on Monday) was no fun at all, but if it gets to the mid 20s, it is hard not to see it as an opportunity. Even at its current weight on my portfolio, I may not be able to resist topping up for what will be the first time in several years. I haven't taken up the fleeting opportunities offered by such drops over my 8 year holding period.

The emergence of the GLP-1 agonists is a longer-term threat that should not be taken lightly, but will likely only materialise much further out if at all.