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jehudith (and any others who may have a view),

I take it from your post last year, you're a fan of Resmed (ASX: RMD, also NASDAQ: RMD).

What's happened? When its price was over the $10 mark, I thought it looked too pricey. Now it's well down into my target (buy) price range. I can't find anything dramatic that would cause this drop. Latest half year statements look all right. The only blip on the horizon is a story about Innomedics's and its new product, 'Nasal Aire':
http://www.thewest.com.au/20020125/business/tw-business-home-sto41629.html

This doesn't seem like much of a threat. Innomedics have only just received FDA approval. They had no actual sales when this story appeared. If they've been getting FDA approval, it's not hard to accept that Innomedics would have back-orders and pent-up demand. $40mill doesn't seem to be a dramatic threat to Resmed's recent $187mill half year sales, or to the $500million market. Resmed claim that the Nasal Aire device is a subtly different market, and not a direct threat. Innovision claim that 98% prefer their device. That may be so. Probably 98% percent of those who wear glasses would prefer not to, but they still do. Hardly seems to justify the recent falls.

I searched the internet, but didn't find anything about Innomedics, except for the article above. The only references to Nasal Aire were in health journals, where it is lumped with similar products. Hardly seems to be earth-shattering.

What am I missing? Has the market just suddenly got tired of companies with 3-digit P/Es, or is there something more sinister? Nervousness about accounting for last year's acquisition of Medizin-Technology GmbH?

Any ideas?

Chris

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Chris

They got some company,

Cochlear, CSL and ResMed are still being punished by the investors. Even though all compaies have recently produced record breaking financial results for the first half of this financial year their share prices are still going down. During the week Cochlear fell 6.12%, CSL 3.53% and ResMed 6.73%.

http://www.biomedoz.com.au/

Maybe a bit of buy on rumour sell on fact.

JR

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Thanks jono,

Certainly I considered thenm over-priced before. I've actually managed to take a small profit on Cochlear. If the price drops much further, I'll move back in. I still want to hold some -- it's a good company. Along with CSL, it's dropped about 25% percent from its high. Resmed has been on my watchlist for a while. It's dropped about a third since the start of the year. Just seems strange for the market to be so obliging. Makes me wary.


Cheers,

Chris
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jehudith (and any others who may have a view),

I take it from your post last year, you're a fan of Resmed (ASX: RMD, also NASDAQ: RMD).


Chris
I had a small holding in RMD until recently when I sold because I thought the price was levelling off at the top. I don't know who is doing the marketing in the US but as a small company without marketing push it's an uphill battle. The costs of marketing in the US are astronomical and without, say, a company like Abbots to push your product it's an uphill battle. I don't think there is anything wrong with RMD or it's product - it's just that some of the euphoria associated with the product has dissipated.
Regards
Harmy
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Thanks, harmy,

Very good points about the marketing.

Chris
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Very good points about the marketing

Chris
I think the marketing factor is often ignored when overseas companies float on the US market. There have been a number of Oz and NZ companies recently who have found that simply listing on the Naz or the Dow does not automatically guarantee success.
I have shares in a biotech company (BTGC) - this company did all the right things and had as its flagship a drug called Oxandrin which prevented weight loss ie it put on weight. The company thought it was doing the right thing in it's marketing approach by targeting HIV sufferers and similar types. However, this is a fairly static market and it wasn't until Abbotts took over the marketing and pointed out the obvious, that the elderly also had this sort of problem. As a result over 500 Abbotts salespeople hit the local doctors surgeries and sales soared by over fifty percent. It's still growing rapidly too.
Regards
Harmy
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Hi Chris

I bought some more resmed shares, and when and if it drops lower I will buy some more. this company has no debt, has a sustainable competitive advantage, a great managment team and is making money.

If I thought it was OK at above $10, I certainly think it is OK at this price. It is the only company that I own that has a very hig PE and is expensive but I have gone in with eyes wide open.

I believe it is a company for the long term.

OK it went down - so did coates (i bought at $1, sold at 70c bcs I was worried - increase in debt etc but they were open with me and their financial controller returned my phone call and answered any questions I had - it is today $1.85; orica - bought at $10 sold at $4.50 is now above $10 - I didn't investigate it enough (financial statements etc going into the company and going out of the company - new managment is turning the company around). One last one that I did not loose money on Santos - bought at $3.50 went to about $8.00 fell to $4.00 went up again went down again - I kept looking at the financials- this company is doing all the right things is improving its earnings every year, has conservative managment, dividends doing fine, etc. So what is going against it - the SA govt has in legislation limited shareholdings. so the company's price is still low. did I buy more shares below $6.00 - yes. Did it take me about 5 years to learn what is going on in the company - yes. Am I going in with my eyes wide open - yes.

so the above is why I bought more resmed shares for the long term - probably about 10 years - it is in my superfund.

I hope that helps

judy
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Thanks, Judy.

Like you, I have plenty of confidence in its future. It's already a substantial player in its market. It's fundamentals look really good. Could be some pressure on its price for a while. I only choose stocks for the long term -- don't know enough about TA, or have enough confidence in it, to try short term plays.

Don't share your confidence about the debt, though. Didn't they issue US$150 million worth of convertible notes at 4% interest last year?

Chris

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don't know enough about TA, or have enough confidence in it, to try short term plays.

Chris
For a long time I believed in the "TA is all hokey and bunkum" type of thinking. I was a LTBH based soley on FA. Then it all changed when I came into contact with some people who used TA successfully and were exiting stocks which I held onto because I was a LTBH which was the only way to go - wasn't it ?? When I was bitten enough times to realise that there was more to TA than met the eye and the people who used TA were hanging onto their money and increasing it while I was on a losing streak I decided to start reading about it.
I wouldn't trade now without carrying out FA to begin with and then using TA for entry and exit points.
I've made more money since investing this way than I ever did before and it worry free because the charts tell it all.
If, at some stage, you start to get curious there are a number of people on this board who, I'm sure, would help you get started.
Regards
Harmy

PS. As an excercise go to this link for the QCOM chart.

http://clearstation.etrade.com/cgi-bin/details?Symbol=qcom&Refer=http://clearstation.etrade.com/

Look at how the 13 day moving average is well below the 50 day moving average. Note how the price is below the 13 day average and also note the major fall in price since December. This stock is clearly heading for lower lows and yet there are diehard people on the QCOM board who cannot or will not see that this stock is still in a major downtrend.
Now ask yourself if you think this is a good investment !! Only when the charts indicate a turnround could you buy with confidence and say that "I think that I bought at the bottom".
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thanks Chris

I will do some more checking into its debt. First positive about the debt is that it is not bank funded - I'll have to find out how they have used the debt - could be to buy into france or germany and also what is the debt ratio in the company.

Judy
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Hi Harmy

I looked up resmed in etrade and yes it does look like there is still quite a bit for it to fall(if I look at the cross over of the share price and the moving average - not that I know much about TA only the bit I have gleaned from going to ASX lunch time lectures). It is trading at a PE of over 80 and p/nta at over 9 - so the share is not cheap by any stretch of the imagination.

I have never got interested in charting bcs I thought it is hocus pocus - but I am always willing to learn. Maybe it is another way of determining a valuation - which is a topic that is of major importance in my thinking but it is not something that I am comfortable with - there seems to be too many formulas.

but if I look at the PE of over 80, and p/nta - rmd is not cheap and more of a speculative stock - it is one of my specs, the other one I have is transurban - both are difficult to value. maybe in both cases there is a good argument for the use of TA.

Judy
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chris

is there an Australian web site equivalent to

http://clearstation.etrade.com/cgi-bin/details?Symbol=qcom&Refer=http://clearstation.etrade.com/

I was trying to have a look at guiness peats charts?

Judy
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OK I did some work on the financials using the 2001 financial report (10k)
looking at note 7. debt is not 150m but 180m bcs the notes were oversubscribed. interest payable is at 4% (i think the explanation was a bit hard for me to understand)

debt to equity ratio = borrowings - cash
-----------------
shareholders equity
= (180,000-40136)/100366
= 139%

interest cover = EBIT/net interest payments
= 26042/762
= 34.18

so my conclusion is this - debt to equity ratio is very high - i'm not happy about it. However, interest coverage is 34x - which is excellent and they don't have a problem paying that.

looking at the 10Q - september
debt to equity = (180,000 - 60,444)/116,625 = 103%
interest cover = 13187/735 = 17.94

so doing a comparision - though you can't really compare annual to quarterly results - debt to equity ratio - moving downwards (that is definitely a positive); interest cover still greater than 3 - so the company looks good from this angle.

if you look further into the 10k (the 10Q, doesn't really have notes attached) - sales in all its segments have increased substantially ie in US, , Germany, France, australia and rest of the world. the totals are as follows:(in thousands)

2001 2000 1999
$155,156 $115,615 $88,627

of course I have to do more analysis - inventoris, recievables, versus sales, free cash flow, gross profits, ROIC.

but I think it is OK for now.

If you want to do a more detailed analysis - let me know and we can do it together.

I hope the above helped - though it would not have helped the valuation.

regards

Judy

I spoke to my broker about 2 weeks ago about resmed - the share price dropped bcs another company has brought out a competitive sleep disorder machine - it is not yet on market. Fischer and Paykel healthcare share price also dropped as did the other main US competitor (I can't remember the name) - he thought it was an over-reaction - so lets watch it and see if we can pick up a bargain.
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jehudith,

If you want to do a more detailed analysis - let me know and we can do it together.
Sounds like a good idea. Wouldn't mind doing that.

I spoke to my broker about 2 weeks ago about resmed - the share price dropped bcs another company has brought out a competitive sleep disorder machine - it is not yet on market
Your broker could be referring to this article from The Age, 24/1/2002
http://www.theage.com.au/business/2002/01/24/FFXH3XYZRWC.html
In a statement released just before the US market closed on Tuesday, Innomedics claimed its "Nasal-Aire" device, which is expected to be released to the market within the next couple of weeks, had already lined up $US20 million-worth of orders and that it had been preferred by 98 per cent of users involved in a "blind" trial.

Or this, from the West Australian, 25/1/2002:
http://www.thewest.com.au/20020125/business/tw-business-home-sto41629.html
Chief executive Peter Farrell said he was sceptical about Florida-based Innomedics"announcement that it had $US20 million ($39 million) worth of orders for its soon-to-be released Nasal Aire device.

Yesterday, Resmed shares slipped 6.7¢ to $9.033 after falling 7.6 per cent the previous day in reaction to the Innomedics announcement.


This was the product I referred in my first post at the start of this thread.


There is also this gem from AFR, 1/2/2002
The strong results followed a recent 10 per cent plunge in ResMed's share price, due to predictions of falling demand from US competitor Respironics.

Respironics and Resmed have slugged it out a few times in the courts over patents.



Chris
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is there an Australian web site equivalent to

http://clearstation.etrade.com/cgi-bin/details?Symbol=qcom&Refer=http://clearstation.etrade.com/


Can't help you much there.

Most of what I use, I get from Comsec, or ninemsn (useful Finder screen function), or from the Companies' own financial statements.

Some of the TA people probably know of sites that offer those flasher features.
I'm pretty sure we are left behind a fair bit in terms of information and disclosure, on this side of the Pacific.


Chris
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harmy,

If, at some stage, you start to get curious there are a number of people on this board who, I'm sure, would help you get started.
Well, I'm certainly curious, and definitely interested. I am however, fairly sketical, have a pretty good grasp in maths, and can ask an enormous number of questions.

Interesting, your example of Qualcomm. Many of the ratios look similar to those of Resmed.

A few differences, though.
Qualcomm has frequently shown negative earnings. Resmed has shown pretty consistent growth over the past few years, apart from the writedown for last year's acquisition.
Are QCOM's revenues declining? Resmed is still confident of future growth in sales and earnings.
Resmed has consistently beaten analysts expectations, I don't think QCOm has been so consistent.

Just QCOM's fundamentals baffle me as to why they would think it has reached the bottom.

Chris
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I spoke to my broker about 2 weeks ago about resmed - the share price dropped bcs another company has brought out a competitive sleep disorder machine - it is not yet on market. Fischer and Paykel healthcare share price also dropped as did the other main US competitor (I can't remember the name) - he thought it was an over-reaction - so lets watch it and see if we can pick up a bargain.


Judy
I'd suggest you watch your buy in point !!
Both Oz and the US charts show that this stock is in a major downtrend with a way to go.
This chart stinks - it doesn't get much worse than this !!
http://clearstation.etrade.com/cgi-bin/details?Symbol=rmd&Refer=http://clearstation.etrade.com/

Regards
Harmy
PS Not knocking your FA which was great !!
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Chris
This probably got a lot to do with the fall in price........

Respironics and Resmed have slugged it out a few times in the courts over patents.

Having followed the blow by blow court battles of one Rambus (RDRAM memory) it frightens the life out of investors because of the vagaries of the US court system.
Regards
Harmy
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is there an Australian web site equivalent to.....

Best one for Oz is incrediblecharts.com which is excellent. I use Clearstation for US stocks.
Regards
Harmy
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Just QCOM's fundamentals baffle me as to why they would think it has reached the bottom.

Chris
It's great that you are now delving into the TA side of things !!
Look at it this way !! -- QCOM (and others - RMD for example) probably does have great fundamentals BUT there are other factors that effect share price that have nothing to do with how well a stock is doing from an FA perspective.
Look at this !!
http://www.latimes.com/technology/la-000000776jan04.story?coll=la%2Dheadlines%2Dtechnology
Why do you think that QCOM's price is dropping when this sort of stuff is showing up.
What the charts do is to very quickly point up how a share is doing and whether you should stay in or get out !! Long before the FA side of the company shows a downturn TA will get you out !!
Look at Resmed - good company but why is it's price falling like a ton of bricks ?? - alternative technology, legal arguments over patents - I don't know but looking at the chart you should have exited around Jan of this year.
If ever there was a lesson I learned it was "never marry a company and always follow the charts"
Regards
Harmy

PS Go out and buy a book called "Secrets for Profiting in Bull and Bear Markets" by Stan Weinstein published by Mcgraw Hill - it's easy to read and will open your eyes.
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harmy,

Thanks for that.

According to Amazon.com, the book is out of print, but I think I can find a copy.

About your QCOM,
http://www.latimes.com/technology/la-000000776jan04.story?coll=la%2Dheadlines%2Dtechnology
Why do you think that QCOM's price is dropping when this sort of stuff is showing up.

Isn't that ultra-wideband only useful for very short distance communication, like maybe ten metres? I thought it's application was for things like garage door openers and control of appliances in another room of a house. Competing technologies could be things like GAP, wireless ethernet, CT3, that are for communications and control within a building, or its immediate surrounds. I can't see the connection with QCOM. I don't think there is any likelihood of a telecommunications network using that technology. The FCC is only involved because it a radiating device, and potential interference source, as would our DOC.

Incidentally, about the charts,

I see several crossings of the 13-day moving average and the 150-day moving average, at about the same price. For QCOM, there are three crossings between June and September. For RMD, there are three crossings between September and December. Doesn't that strategy lead to lots of false entries and exits?

Chris

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Ok chris

I will get started next week on an analyis of resmed - I am also going to do an analysis of a bank stock on the foolish collective board - looks like its going to be a busy couple of weeks.

resmed is down to about 7.00.

Judy
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chris

jono just posted a link to a very good site on yahoo that does the charts.

judy
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Chris

Isn't that ultra-wideband only useful for very short distance communication, like maybe ten metres?

I'm not into CDMA technology so I can't say with confidence that QCOM's technology will be affected - but ultra-wideband has appeared to have spooked a number of QCOM and similar technologies into thinking that ultra-wideband will affect their technologies. It may, or it may not, the point is that it appears to have affected the share price simply because it appears to be a an alternative competing technology.

I see several crossings of the 13-day moving average and the 150-day moving average, at about the same price. For QCOM, there are three crossings between June and September. For RMD, there are three crossings between September and December. Doesn't that strategy lead to lots of false entries and exits?

Yes - it can do but this is where Weinstein's book explains how to set your stops (either actual or mental). You won't get it right all the time but in the main you will. Far better to exit early with even a small profit than exit late and lose it all.

TA will give you a positive guide rather than an actual exit/entry point. Experience and knowledge of individual stocks also helps. One stock may only rise or fall 10% in a trading channel so if it falls 15% that may be a warning sign. Other stocks may rise and fall 30% or more which will also give you a guide. Weinsteins book is excellent if for no other reason that he has a very good method of setting stops.
The reasons I finds charts so valuable is that a stocks behave in a similar way to moving bodies. My memory of the laws of physics is a bit hazy these days but there is a law that states "a moving body will continue to move in the same direction unless an event occurs to change it" (I hope I've got that right - anybody ??). What this says that if a stock is in a downtrend it will continue in a downtrend until some occurs to change it. With Resmed, for example, it is likely to continue on downhill until an event occurs to change it ie a good analysts report or a good annual report.
Regards
Harmy
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What this says that if a stock is in a downtrend it will continue in a downtrend until some (event) occurs to change it.

While I don't necessarily disagree with this statement I think it is a bit silly. No doubt it would have good value as a dinner party one liner.

News will change a trend as it should.

What about when news that should change a trend doesn't?

When a trend changes sometimes the "news" is obvious.
BUT if the trend changing news is NOT obvious people will go looking for news until they can find some and say "this" is the news that caused the trend change. Sort of like "curve fitting".

Anyway, I hope there is no "news" about RMD before it reaches my price range, CSL & COH for that matter as well. It's not RMD specific, the bios generally are on a bit of a downer lately, maybe it's another bubble that has burst.

Now I just have to do 2 things, work out what my price ranges are - and find the capital just in case.
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While I don't necessarily disagree with this statement I think it is a bit silly. No doubt it would have good value as a dinner party one liner.

Barcoo
It is a truism nevertheless, that new lows (or highs) beget new lows (or highs).
Regards
Harmy
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Barcoo
I meant to add this to my previous post.

Anyway, I hope there is no "news" about RMD before it reaches my price range, CSL & COH for that matter as well.

Judy has indicated that she is also looking for an entry point. It's also on my watch list. I don't know whether you have any thoughts on an entry price but I believe it may well fall to around $4 or $5 at which point it would probably be a good buy.
Regards
Harmy
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Looks like it's trying to rally today, has found some support at & around $7.00. That downtrend is savage & will take some breaking & even more for a break to hold. In any case $ 7.50 is the first resistance that RMD has to overcome before any long on this can be considered. A rally looks likley from these levels with an upside potential to around $9.50, over the intermediate term, longer term you'd expect that RMD will have more downside( a return to the current trend)

INTRADAY

http://www.ozestock.com.au/charts.asp?symbol=rmd&type=1day

6 Month Chart.

http://209.155.229.115/paritech_charts/ChartImg1.dll/GetGif?config=paritech&cid=1&exchange1=ASX&Time=6mo&Symbol=rmd&Frequency=1dy&PriceDisplay=candle&PriceIndicator=simpleMA&VolumeIndicator=none&Param1=200&Param2=90&comparisonSymbol=&comparisonSymbol2=&Height=375&Width=500&DateTime1=3520025:13:12PM

JR Not holding RMD.
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