The ResMed share price is making the ASX's rough start to the week look pretty mild by comparison. This dual-listed healthcare stock ended last week at $39.53 a share. However, those same shares opened at just $37.85 this morning, before dropping to an intraday low of $37.58 soon after. That was a loss worth 4.93% at the time. The company is currently just a touch above that at the time of writing, down 4.2% at $37.87 a share.

So what's going on here?

Why is the ResMed share price down almost 5% today?

This dramatic share price drop appears to be a collective pullback from the spike in the company's stock last Friday, 31 October.

As we covered at the time, that initial spike followed a well-received (at least initially) first-quarter update from ResMed. This update revealed that the company increased its revenues by 9% to US$1.3 billion for the quarter. This was largely due to higher demand, particularly in the United States, Canada, and Latin America, for its sleep-focused medical devices and accessories.

ResMed also revealed that its gross margin rose 2.9% over the period, due to improved efficiencies in manufacturing and logistics.

Despite ResMed's expenses rising by 7% on a constant currency basis, the company reported an 11% rise in net income to US$349 million for the period. That translates to a diluted earnings per share (EPS) of US$2.37.

ResMed CEO and chair Mick Farrell told investors that the rest of the 2026 financial year looks bright for shareholders as well, flagging "strong, sustainable, profitable growth".

On Friday, ResMed shares rose by 1.65% by market close after soaring more than 2% higher at one point in intra-day trading. However, US investors had a less rosy reaction on Friday night (our time), sending the company's US stock 2.13% lower. It seems ASX investors have taken their cues from this today and are reversing Friday's gains accordingly. Let's see which sentiment takes hold over the rest of the trading week.

The post Why is the ResMed share price down 4.9% today? appeared first on The Motley Fool Australia.

Whilst the ASX 200 is having a bad day, it's been far worse for Resmed shares. This ASX 200 healthcare stock closed at $36.25 a share yesterday. But this morning, those same shares opened at just $35.30 and are now down a painful 3.5% at $34.98 each.

So why is the Resmed share price getting such a dramatic hammering this session?

What's up with the ResMed share price today?

Well, it's hard to know for sure. There haven't been any fresh developments or news out of Resmed itself today on the ASX.

But there are still a few things we can point out.

Firstly, it's been a pretty rough day for most ASX healthcare stocks. The healthcare sector is currently the third-worst performing sector on the markets, with the S&P/ASX 200 Health Care Index (ASX: XHJ) currently down 0.65%.

Other healthcare shares, such as CSL Ltd (ASX: CSL), Polynovo Ltd (ASX: PNV), and Cochlear Ltd (ASX: COH), are also suffering today.

Secondly, Resmed's US-listed stock ResMed Inc (NYSE: RMD) also had a pretty bad night last night. Resmed has a dual-listed structure, meaning its shares can be found both on the Australian market and on the New York Stock Exchange. The American shares often set the tone for what happens on the ASX.

Last night, Resmed's American share price had a shocker, falling 5.12% to US$238.03 a share.

Our Fool colleagues over in the States posited that this fall might be a result of a broker downgrade. Wolfe Research's Mike Polark reportedly moved Resmed shares from a hold to a sell.

Resmed gets a sell rating

He also gave the company a 12-month share price target of US$180 per share, which, if accurate, would see the company lose a quarter of its value from current levels.

Polark's pessimism stems from concerns that Resmed might be poised to lose market share to its pharmaceutical rival Eli Lilly. He argued that "disruption risks to RMD's business rise in 2025-2026 due to Lilly's likely launch of an obstructive sleep apnea indication for its GLP-1 medication tirzepatide".

So that might have been what tanked Resmed's US stock last night, and thus indirectly responsible for today's poor ASX showing from the Resmed share price.

Despite today's sell-off, Resmed's ASX shares remain up a robust 37.7% in 2024 and 53.9% over the past 12 months.

The post Why is the ResMed share price taking a thumping on Thursday? appeared first on The Motley Fool Australia.

Resmed shares performed slightly better than the broader market. The ASX 200 healthcare stock closed 0.43% higher at $32.34 after rising even higher this morning to $32.71 a share, a gain worth just over 1.5% at the time.

This green day for Resmed came despite some potentially difficult news for investors to digest.

According to a United States Securities and Investments Commission (SEC) filing, ResMed CEO Michael J. Farrell has just sold a significant chunk of shares.

Remember, Resmed is a dual-listed share and has a home both on the ASX and the New York Stock Exchange under the ticker ResMed Inc (NYSE: RMD). The company's base is also in America, in the Californian city of San Diego.

This SEC filing shows that Farrell disposed of 14,683 Resmed shares on 7 May (US time) this week.

These sales were executed at an average share price of US$216.50. That means Farrell would have bagged a cool US$3,178,815, which is approximately $4.81 million in our local currency.

There was no explanation given for these Resmed share sales. However, the plot thickens when we examine another two transactions reported on the same day.

Why has the ResMed CEO been selling shares?

The filing also shows that Farrell acquired 14,683 shares on 7 May. So Farrell has apparently bought and then sold $4.81 million worth of Resmed shares on the same day.

Well, not quite. The acquisition price of these shares was listed as US$84.98 – a far cry from the US$216.50 selling price. This implies that these shares were converted from options that the CEO possessed.

It appears that Farrell's options were exercised and converted into ordinary Resmed shares, which were promptly sold.

Should investors be worried?

Well, that's up to them. All investors like to see their company's management teams align themselves financially with investors as much as possible. That means owning as many shares as they can. When CEOs and other senior management figures sell out of said shares, it can cause some understandable consternation.

However, it must also be remembered that most managers tend to try to follow the rules of good wealth management, which most would agree includes at least somewhat diversifying one's wealth. Unless you're Warren Buffett, having most of your net worth tied up in one stock investment is rarely a good idea.

This might be a case of Farrell doing just that when it comes to Resmed shares. Perhaps the CEO has a large tax bill coming up or wants to buy a new house.

Before investors follow Farrell and sell out of their shares (which doesn't appear to be happening anyway, judging by the recent share price performance), keep in mind that Farrell still owns a significant chunk of the company.

The SEC filing shows that the CEO retains 440,752 Resmed shares (presumably the NYSE-listed stock) even after this week's sale. Those would have a value of US$95.57 million today.

The post Resmed share price higher despite CEO hitting sell on 14,683 shares appeared first on The Motley Fool Australia.

The Motley Fool chats with fund managers so that you can get an insight into how the professionals think and their thoughts on various ASX shares. In this edition, TMS Capital portfolio manager Ben Clark explains why the Square-Afterpay deal is so fantastic for shareholders.

Investment style

The Motley Fool: How would you describe your fund to a potential client?

Ben Clark: Our High Conviction Fund has very much got a growth skew. So we'd look for businesses that we believe can materially grow their earnings over long periods of time. 

It's an 'index-unaware' fund. As opposed to many of the funds out there, if we don't like parts of the market, we just won't invest in it. So probably the best example of that, the Australian share market is heavily weighted towards banks and resources — we don't own any banks in the fund and we only own one resource stock.

I say to investors, we truly practice what we preach. If we see a business that we really, really like, we'll take a very materially overweight position in it. We truly believe in long-term, patient investing. 

So I think nearly three-quarters of the stocks that are held in the fund were held at the fund's inception on 1 July 2016 — and have been held by our company in IMAs, or individually managed accounts, for much longer periods of time than that. 

It's quite a concentrated mix. We generally have about 20 to 25 shares. 

In terms of what we'd look for when we're investing in a company, probably 4 or 5 key attributes. [We] heavily favour founder-led businesses with plenty of skin in the game with a proven track record. We like companies that have got their balance sheet in order and can ride through the unexpected, as probably COVID's taught us. Businesses that we believe have a structural tailwind behind them, and ideally businesses that can reinvest back into themselves at very high returns on invested capital, which we believe adds to long-term compounding effects.

Afterpay-Square deal makes 'a lot of sense'

MF: Afterpay Ltd (ASX: APT), which is a hot topic this week, would fit your philosophy pretty well?

BC: Yes, Afterpay is one of those stocks that has been held since the fund's inception. We are active in trimming and adding to positions as we see them go in and out of favour. And Afterpay… is one that has swung around dramatically in price over the last 5 or 6 years. 

I think as of today, we've got about a 5% weighting to Afterpay and that's been kind of consistent through the last 5 years. So you would have to say that we've been trimming more often than we've been adding to it, given the rise in the share price, but it has definitely served us well.

MF: How do you feel about the Square Inc (NYSE: SQ) acquisition?

BC: I think it's an incredibly good transaction. Square is a business we know really well. In individual accounts, we do own some exposure to Square directly. We own a business called Tyro Payments Ltd (ASX: TYR) in the High Conviction Fund and we did quite a bit of work on Square when we were looking at Tyro, so I think it's an incredible business that the fit between the 2 companies makes strategically a lot of sense.

I was on the call last night, on the Square earnings call, and I really think that [for] the 2 founders of Afterpay, this is not an exit for them. They see this as the transaction [that] gives them the ability to accelerate the growth of Afterpay. 

This is one of the strengths of the High Conviction Fund — that this index-unaware basis will mean that we will continue to own Square as a CDI listed on the ASX. 

2 ASX shares still going strong after 5 years

MF: What are your two biggest holdings?

BC: Probably the last few years now… No.1 is Resmed CDI (ASX: RMD). We've got about an 11% weighting in Resmed at the moment. Again, it's been held since the fund's inception. It's one stock that I don't think has ever been trimmed, and we're still very bullish on the outlook for that business. 

And the second is Xero Limited (ASX: XRO). We have about a 9% weighting to Xero. Again, I don't think it's ever been trimmed since it entered the portfolio and I think it was put in there about a year after the fund started running. 

So they're the businesses that we really haven't tinkered with. They have been quite volatile — as most growth stocks are — and we've tried to take advantage of that volatility over the years.

How does the future look for these 2 shares?

MF: You've done pretty well out of both, but it sounds like you're happy to continue holding them?

BC: Yeah. Look, [they're] obviously very different businesses. 

In the case of Resmed, we believe that Resmed was a massive COVID loser last year. Their main market is in the United States. If you were in the US and you were worried, or your doctor was worried, that you might have sleep apnea, you really weren't in a rush to go and get tested in hospitals, go into a doctor's surgery, sleep clinics, et cetera. I mean, there really was a realistic chance you would die if you got COVID in America last year. And hospitals were closed to non-COVID procedures, so it was a very difficult year for them.

But if you fast forward to this year, there's kind of 3 key things going in their favour. The reopening of America and a backlog of cases that will need to be treated. The first launch of their HVAC machine… This isn't a frequent product cycle. This is the first one I think in 6 years and you see last time we saw meaningful acceleration in sales when the new machine was released. And thirdly Koninklijke Philips NV (AMS: PHIA), which owns Respironics, has had a major product recall of their HVAC machine, which is the number 2 player in the US market. 

To us, the stars are aligning to what is going to be a pretty good year for Resmed.

In the case of Xero, [it's] still probably going through somewhat of a troubled time with COVID. The recent lockdowns across the country are not good for a lot of small and mid-sized businesses. 

Ultimately, as bad as it sounds, the accounting software is the last thing to be switched off if a business doesn't survive this time. Because they still need to do BAS tax returns, wages, all that sort of stuff. So they're incredibly resilient assets within the businesses, and the government's putting a lot of businesses back on life support, and hopefully this is the last of the lockdowns that we see. 

But we just think there's so much potential for new adjacencies for Xero. Growth in new regions, et cetera.

The post These 2 hot ASX shares take up 20% of our fund: manager appeared first on The Motley Fool Australia.

That's the opinion of T Rowe Price Group Inc (NASDAQ: TROW) head of Australian equities Randal Jenneke, who said the country has "likely passed the peak" of the post-COVID economic recovery.

"We believe GDP growth and inflation expectations will cool over the year," he said this week.

"The latest lockdowns in NSW and Victoria are poised to further curb some of the market's enthusiasm for ongoing strong economic growth."

Types of ASX shares that are good in slowing economies

According to Jenneke, slowing economic conditions favour what he called "quality" stocks.

"Historically, the highest ranked companies in the category have outperformed the lowest ranked by 1.8% each month on average during decelerating growth periods," he said.

"Conversely, they have underperformed by -2.2% per month during recovery periods… With the strong rebound in growth during the second half of last year, the bucket experienced its worst return in close to a decade."

Jenneke also showed the same pattern happening during the global financial crisis, dot-com bust and the 1997 Asian financial crisis.

"While we may not be entering another downturn of such magnitude, we are moving towards an impending slowdown," he said.

"As we do so, we have already seen quality start to return to favour. It was the best performing factor in June and year-to-date it is now second only to the much-hyped value rally."

So what is 'quality'?

Jenneke explained that, to his team, "quality" meant strong return on capital and resilient earnings growth.

He put up 3 examples of quality ASX shares that T Rowe Price recently increased its exposure to — Resmed CDI (ASX: RMD), Goodman Group (ASX: GMG) and CarSales.com Ltd (ASX: CAR).

"Over more than two decades of data for the Australian market, high quality had outperformed low quality by 6.7% per annum," he said.

"With many of these factors in mind, we believe the school of quality is back in session and is poised to outperform over the coming year."

Only on Monday, Resmed displayed the resilient qualities Jenneke was espousing.

The healthcare stock shot up more than 2% on a day when the ASX generally was having a shocker. In fact, it is now trading at a 52-week high.

Goodman also held firm, holding its value in a sea of red on Monday. Carsales lost a little on Monday but has added more than 8% in the past month.

The post 3 ASX shares to buy before looming economic slowdown: expert appeared first on The Motley Fool Australia.