The Wulff is Stockhead\u2019s regular wrestle with the savage heart of ASX-trading as per the free-ranging mind of Bell Direct\u2019s market analyst Grady Wulff.<\/p>\n
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Grady says news moves markets, but offers a few recent examples of why simply plugging in and turning off your reason, isn\u2019t the best of investment strategies.<\/p>\n
\u201cIt is important to be aware of, and stay up-to-date with company updates, however, basing investment decision on media news and speculations has exposed many investors in recent times, often leading to missed opportunities for prematurely selling out of, or buying into equities.<\/p>\n
\u201cThe most recent example of noise moving a share price for the wrong reason has been the headlines around weight-loss injections and drugs like Ozempic diminishing the need for sleep apnoea products from companies like ResMed (ASX:RMD)<\/strong><\/a>.\u201d<\/p>\n \u00a0<\/p>\n Grady says the first headlines of Ozempic\u2019s impact on sleep apnoea demand hit the ResMed share price around August last year (as shown in the above share price chart from the ASX). Investors listened to the news that Ozempic\u2019s \u2018wonder\u2019 weight-loss status would be a key driver of demand shrinkage for sleep apnoea and subsequently, \u2018end\u2019 companies like ResMed according to some headlines.<\/p>\n \u201cThese headlines came at the same time ResMed reported declining gross margins for Q4FY23 which investors took as double whammy for the global leading sleep-tech business.<\/p>\n She says deep diving into research and ResMed results of late paints a starkly different picture to what the fear driven by headlines.<\/p>\n \u201cAccording to the National Library of Medicine, 58% of moderate to severe cases of Obstructive Sleep Apnoea (OSA) is attributable to a BMI greater than or equal to 25. Other causes of sleep apnoea include age, naturally narrow throat or nasal passages, hypertension, type-2 diabetes or a family history of OSA.<\/p>\n \u201cTherefore, it isn\u2019t correct to say that being overweight is the only cause of sleep apnoea, thus demand for ResMed\u2019s products may be slightly impacted by weight-loss wonder drugs like Ozempic, but not completely diminished.<\/p>\n \u201cLooking into ResMed\u2019s most recent results we can also see that the rise in weight-loss drugs has made little impact on ResMed\u2019s bottom-line and overall product demand.\u201d<\/p>\n \u00a0<\/p>\n\n \u00a0<\/p>\n For Q3FY24, ResMed reported revenue growth of 7% to US$1.2bn, gross margin grew 260bps to 57.9% which indicates strong cost management and a recovery to margin expansion, income from operations also rose 25%, cash flows of US$402m, debt repayments of US$220m and the company declared a 48cps dividend.<\/p>\n \u201cThe results speak for themselves in proving weight-loss drugs have little impact on the demand for ResMed\u2019s product suite.<\/p>\n \u201cAs the market now realises that the rising demand for weight-loss drugs has minimal impact on demand for sleep apnoea products, ResMed shares hit a 10-month high on the back of reporting solid Q3FY24 results.\u201d<\/p>\n \u00a0<\/p>\n Grady says another recent example of headlines instilling fear sell-offs in the market is Aussie banks coming under pressure, both large and smaller banks, following the collapse of numerous US regional banks.<\/p>\n \u00a0<\/p>\n Via Bell<\/em><\/p>\n \u00a0<\/p>\n \u201cIn 2023, we saw many investors get the jitters and panic sell out of Aussie banks following the collapse of US lenders including First Republic Bank, Silicon Valley Bank and Signature Bank to name a few.<\/p>\n \u201cThe collapses in the US were the result of their assets declining in value as interest rates increased and due to mass amounts of customers withdrawing deposits.<\/p>\n \u201cThe reason Australian banks were not facing the same collapse concerns is partially due to the stricter governance laws imposed by the Australian banking regulator, APRA, and also due to Aussie banks not having significant amounts of their deposits sitting in treasury securities that are vulnerable to valuation fluctuations,\u201d Grady says.<\/p>\n \u201cDespite this, the fear of bank collapses worldwide spread and Aussie banks faced a mass sell-off with the Commonwealth Bank (ASX:CBA)<\/strong><\/a> \u00a0share price falling from $110.5\/share in February 2023 to $97.56\/share at the end of March 2023, while smaller lender Judo Bank shares fell from $1.46\/share in February 2023 to $1.19\/share by March 2023.<\/p>\n \u201cFast forward to the present day and the banks have recovered with CBA sitting at $113.94\/share in May 2024, and Judo shares selling for $1.33\/share as at 1 st May 2024, as investors regained confidence in the fundamentals behind Australian banks\u2019 ability to weather economic cycles, and investors holding confidence in the strict governance nature of APRA to prevent a crisis to occur here like we saw unfold in the US.\u201d<\/p>\n So, while media and news plays a handy role in our capitalist speculations, it\u2019s always best to do your own research, especially given the high volatility experienced in markets at present.<\/p>\n <\/span><\/p>\n The post The Wulff: Debunking the Big Bank-tank narrative<\/a> appeared first on Stockhead<\/a>.<\/p>","protected":false},"excerpt":{"rendered":"Ozempic V. Resmed<\/h2>\n
Big banks under pressure<\/h2>\n