Pinned straw:
Perhaps both. Today, Wednesday 4th September 2024, the ASX got smashed and every sector was in the red, following falls in the US on their Tuesday (Monday was a public holiday over there for Labor Day).
But not ResMed, or FPH either; both made new 12-month highs today:
Tables sourced from: https://marcustoday.com.au/
Below, not many on the left side (12 month highs) but they ran out of room for the 12 month lows (on the right):
After Industrials, Healthcare was the second least worst sector today, and we have those two CPAP providers heading up the new 12-month high share price list. As well as IXI - the iShares Global Consumer Staples ETF that tracks the performance of the S&P Global 1200 Consumer Staples (Sector) Capped Index, so the sort of thing that people turn to when the world goes pear-shaped - even in a zombie apocalypse, they'll still be selling tins of baked beans I suppose.
Health care and consumer staples are generally considered "defensive" sectors" - so "risk off" sectors, when people just aren't feeling the optimism around the near-term potential of share-markets.
Only thing is - when you look at the charts of ResMed and Fisher & Paykel Healthcare, they do NOT look like defensive stocks, they looks very much like growth stocks - their one year charts are all bottom left to top right.
One year ago, I was arguing that while Ozempic and the like did NOT present a major threat to the future viability and growth of ResMed, I wouldn't invest in them because I felt that people would always be searching for better options for their OSA treatment, due to the invasive nature of CPAP and the drawbacks of being connected to a machine via a tube while you sleep. In short, I felt that CPAP as an industry was ripe for disruption by any tech that was easier to use.
So I thought that future competition from something other than CPAP - for OSA specifically - was the thing that concerned me, so I was never going to be a RMD or FPH investor.
Well, here we are, less than a year later and I'm using a Phillips DreamStation CPAP machine connected to a ResMed mask every night after being diagnosed with severe OSA (just shy of 60 episodes per hour, so around 1 per minute on average) and it's fair to say, tending towards the possibility of having a little rethink about my earlier assumptions and opinions...
As things stand, ResMed (and F&P HC too, though I have never owned it mostly due to a persistently higher valuation) has both characteristics, though the valuation is getting a bit full now atleast for adding to positions.
Once again, and not for the first time, the shares have shown good relative strength through a period of downside volatility.
As my largest holding, long may it continue!
P.S. I hope your CPAP treatment provides the relief that you are seeking @Bear77. I wish you well.
Hi @Bear77 Good topic.
I have owned Resmed since late last year. I bought in not far from the lows, when it appeared that either a great contrarian play or a falling knife. So far so good. I bought more on a dip recently. Needless to say, I have been happy with the performance. I was only just looking at it and wondering if I should trim my holding.
I can't help but feel that the way we see this stock today is related directly to timing and circumstance. Had this down day hit in say January, would RMD have stayed in positive territory? I'd say unlikely. As it stands RMD has "seen off" the weight loss drugs a couple of times now. They have had some decent results recently and the share price is back in territory it was in previously. Clearly the market has much more love for this stock at the moment. I reckon that will be tested as it's getting close to all time highs. There is a psychological hurdle to clear at $40.
I hope you are right and that its a defensive stock with a whole lot of growth. Does it get better than that?
Absolutely both, especially with respect to Resmed - Phillips CPAP solutions are impacted by the recall, and will undoubtedly regain some market share, but this will be difficult.
I feel that classifying these Obstructive Sleep Apnoea (OSA) solutions as "healthcare", with the market dynamics of consumer staples is a misnomer and an error. The total addressable market is large and far from fully addressed; obesity is well documented as a significant issue in Western society (and possibly other cultures, if growing wealth brings similar lifestyle habits). As such, the OSA market truly is both a reliable and a growth industry.
Many overweight/obese people are still in denial about their potential OSA diagnosis. Some who have OSA but do not feel tired during the day, will resist a potentially annoying and embarrassing treatment of CPAP - so the OP is correct, some potential customers will reject the treatment. However, many who do get a diagnosis and try CPAP will find themselves feeling better and more refreshed during the day - they feel better, their lifestyle improves and compliance is actually pretty good. They will stick with it because they really do appreciate a lifestyle improvement. To that extent, Resmed and ?Phillips CPAP solutions will be sticky, safe and reliable.
But the total addressable market is large, and growing. Even if society-wide solutions successfully treat obesity in developed countries (whether by surgery, such as gastric sleeves, or medical such as GLP-1s like ozempic), these will take at least a generation (30years) to work on large scale. Meanwhile, obesity is likely to grow in India and China (apparently not in Japan). To this extent, they will behave like growth stocks.
The only unknown is whether excess profits will draw new market entrants with CPAP devices. Probably they will; whether they can do so enough to encroach on established market players is unlikely. They may chip away at future growth but probably not impede market share.
CPAP is definitely a growth industry %highconviction