Why ResMed Inc. Shares Slipped Today

Does this analyst make a good case? Or is it just more noise from Wall Street?

Jul 3, 2014 at 10:36AM

While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a closer look at particularly stock-shaking upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of ResMed (NYSE:RMD) slipped 1% today after Deutsche Bank downgraded the medical equipment distributor from buy to hold.

So what: Along with the downgrade, analyst David Low reiterated his price target of $52, representing just 3% worth of upside to yesterday's close. So while momentum traders might be attracted to ResMed's year-to-date price strength, Low's call could reflect a sense on Wall Street that the regulatory risks surrounding its growth trajectory are being largely overlooked.

Now what: According to Deutsche, ResMed's risk/reward trade-off isn't too appealing at this point. "The Centers for Medicare & Medicaid Services (CMS) has issued a release to update among other things, details of the roll-out of Competitive Bidding (CB) round 3 and the phase in of special payment rules (i.e. "bundled funding")," said Low. "While there is the possibility the proposals will be knocked back, if implemented, the near term impact will likely be modest given bundled funding will only to be implemented in 12 areas. However, in the medium term this reform could materially slow mask sales growth if implemented widely (i.e. followed by private payors)." When you couple that seemingly real risk with ResMed's 20-plus P/E, it's tough to disagree with Deutsche's cautious stance. 

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4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

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The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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