If Only

‘If only’ I had adopted the Marcus ‘One Stock Folio’ and put all my funds into ResMed (RMD), I would be very much better off right now.  Every time I review my folio, I come upon the same issue.  Amongst the solid performers, the failures and the hopefuls, ResMed stands out.  It is now my most significant investment and out of balance with the rest of my folio.  It is out of balance because it has grown so persistently.  I’ve written before about ResMed because it keeps on performing. I bought it in late 2013 for $5.33, which turned out to be excellent timing thanks to a recommendation in Marcus Today.  The chart from the first listing on the stock market shows a 10-year period of very little progress before the first modest rise in about 2012.  Since then, it has never looked back and has left the ASX 100 and 200 looking as though they have been standing still.  I’ve taken profits a couple of times and each time regretted the move.  Hence my comments about the One Stock Folio.  Last time I took some profit I told myself I would never trim it back again.  I’ve stuck to that so far, which is why it is now significantly out of balance.  ResMed was listed on the Nasdaq in June 1995 with a value of $24M.  It now has a market capitalisation of $51526M and a price tag of $35.61. That’s good growth!     Somewhere in Marcus Today, I read about letting the weeds die, and the good stocks prosper. ResMed has certainly prospered for me.  It has had a few more fluctuations than usual recently but then so has most of the market. The recent spike, which distorts the graph a little, was caused by Covid.  At the start of the pandemic, there was a massive demand from hospitals for ventilators.  The regular suppliers could not make enough.  ResMed's product could be adapted, so the company switched over.  Covid cut the demand for sleep apnea products, so the switch proved very fortuitous for ResMed, providing a bumper profit when many companies struggled to stay alive.  Having fallen from that spike in one of the few serious pullbacks in the price, ResMed is back on its way up, hopefully to new highs.  As I write, the market and ResMed have seen a really good couple of days.  Let’s hope it continues; we all need it.  
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  The yield on RMD is minimal, in line with many stocks on the Nasdaq, and the PE is high, but no one seems to care.  It gets numerous buy recommendations and is persistently valued higher than its trading price.  Only one broker is prepared to say sell out of 22 recommendations.  That’s all very interesting from an investment point of view, but the company is also fascinating as an example of innovative technology struggling to find its way into the world.  There is an excellent summary of ResMed's progress from ideas and research into working prototypes and full production written by the originator of the technology Dr Colin Sullivan.  It’s a good read.  Just put ‘ResMed Origins’ into Google, and it should come up.  It is a story of persistence, of belief in the product and its value to the world.  Above all, it’s a story of finding the right people to join the team, to take a vision and spread it around the world.  Sleep disorders were not at the top of anyone’s priority when it came to expenditure on medical research, so Dr Sullivan found it hard to secure grants to pursue his work.  The very significant impact of sleep disorders on world health was not generally understood, yet William C Dement MD PhD of Stanford University went so far as to say of the ResMed device:-   ‘The only possible rival for a single product that would produce such an upturn in life expectation and quality of life for humanity was the introduction of penicillin’.   It took Dr Sullivan 10 years to get to the point where there was sufficient interest in commercialising his ideas to found a company and begin the process of bringing the product to market.  He was smart enough to realise that he was not the man to lead the process.  Inventors generally do not make good CEOs.  An international company became involved for a couple of years but finally backed out.  ResMed was not for them.  I wonder what they think of ResMed now?   Dr Sullivan finally found good people to help and needed them because the process proved difficult, with legal challenges to his patents and the threat of another company using his ideas and getting to the market before him.  It’s a great story to read and shows just how hard it is, and how long it takes to bring new ideas and new technology to the market.  I often reflect on that when I hear claims that new technology will solve our climate change problems.  History shows that the development of new technology is much slower than people expect. It's great to see Australian ideas and research being so successful on the world market and a great credit to Dr Sullivan and the team he assembled.  It’s also great to see an idea designed to solve a world health problem rather than to make money end up being so financially successful.  Altruism does have value.   If you would like to email Harold please click here. active sailor

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