Rudi’s View: What (Not) To Buy Ahead Of June 30

Array
(
    [0] => Array
        (
            [0] => ((RMD))
            [1] => ((GMG))
            [2] => ((SGL))
            [3] => ((APX))
            [4] => ((BAP))
            [5] => ((GEM))
            [6] => ((HLS))
            [7] => ((ING))
            [8] => ((SM1))
        )

    [1] => Array
        (
            [0] => RMD
            [1] => GMG
            [2] => SGL
            [3] => APX
            [4] => BAP
            [5] => GEM
            [6] => HLS
            [7] => ING
            [8] => SM1
        )

)

This story features RESMED INC, and other companies.
For more info SHARE ANALYSIS: RMD
The company is included in ASX50, ASX100, ASX200, ASX300 and ALL-ORDS

In this week's edition:

• (More) Patience Required
• What To Buy Ahead Of June 30
• What Not To Buy (Sell) Ahead Of June 30

By Rudi Filapek-Vandyck, Editor

(More) Patience Required

A largely moribund share market harbours many frustrations, even if money is currently flowing into Australian shares ahead of June 30.

My personal suspicion is institutional investors don’t want to close off the financial year with too much loose change sitting idle.

The odd irony here is that instos buying is meeting tax loss selling elsewhere. This might create some odd dynamics over the remaining eight trading sessions in June.

No doubt, one particular stock that has frustrated many throughout the year past is CPAP champion ResMed ((RMD)).

After selling down upon coordinated global attack on potential GLP-1 impacted business models in 2023, that share price made it all the way back above $40 (from circa $21 at the peak of selling), but the twelve months past has seen it retreat back into the $26-$27 region.

So much for making fun out of traders believing GLP-1s will eradicate obesity and with it all businesses who somehow benefit from it.

Investing in the share market is supposed to be closely linked to corporate earnings, but that correlation has gone painfully missing during these processes.

Anyone frustrated surely includes management at the company. At face value, ResMed has done everything its local peers could not during the post-covid era, growing roughly at 20% per annum and increasing its margins.

The precise data were summed up by Morgan Stanley on Thursday morning: 19% EPS growth per annum over the three years to March 2026 while revenue grew by 11% (the difference is made up by gross margin expansion).

Current consensus forecasts are for 18.3% EPS growth for FY26 –yet again, exceptional when compared to CSL, Cochlear, Sonic Healthcare and the like– though FX headwinds and less room for further margin increases are tempering expectations for next year.

Consensus is currently positioned for “only” 9.3% EPS growth in FY27. Yes, that is a major step down from what has been achieved in previous years.

Is this why the share price is where it is? We observe general sentiment towards the healthcare sector –globally– is still net negative.

Stockbrokers covering the company in Australia all had Buy-equivalent ratings with price targets well above the share price, suggesting the market, yet again, was playing silly buggers for all the wrong reasons.

Note the verb in that previous sentence; ‘had’ not ‘have’.

Morgan Stanley downgraded the stock this morning, handing traders yet another opportunity to push the share price down by a further -3.8% on the day.

But let’s first zoom in on what Citi analysts had to say earlier in the week.

Sector Sentiment & Ongoing De-rating

Yes, the shares look undervalued, Citi stated on Tuesday, with top line growth still slated for 10% per annum at least until FY30 which, in particular among ASX-listed peers, continues to look very attractive indeed.

But then Citi analysts met up with US investors and discovered general sentiment towards US medtech companies –including ResMed– remains bottom-of-the-barrel negative.

For your typical contrarian investor, this would be a signal it’s time to start piling in, but Citi makes the point that, within the American context, ResMed’s growth prospects look rather middle-of-the-road (i.e. not exceptional) and when combined with the overall sector de-rating and low sentiment, it’ll probably take time for investors to start paying attention again.

In layman’s language: if you’re owning shares in ResMed right now (as do I) you will have to be patient.

As the sector de-rating might well last another leg (or two), Citi analysts have lowered their price target to $38 in Australia, US$270 for the US listing (10x Aussie shares), having placed FY27’s PE multiple on 15x, which corresponds with similar growing US comparables.

With the shares trading around $26.50, that continues to leave an extremely large gap, hence why Citi’s rating remains Buy.

Prior to Tuesday’s change of heart, Citi’s price target had been $48, so here on display is equally a major de-rating into how this broker feels ResMed should now be valued.

Philips’ Curve Ball

As signaled above, ResMed’s perfect record of Buy ratings ended this morning with Morgan Stanley moving to Equal-weight from Overweight, while reducing its target to US$230 from US$290.

So what’s happening here?

Less room for further margin expansion, but also the anticipated return of major competitor Philips into the American market, expected to limit ResMed’s growth potential.

Morgan Stanley’s revised forecasts only suggest 5% year-on-year growth for FY27, suggesting consensus needs to cut its current number by circa half and that will make ResMed a whole lot less exceptional in the year ahead.

The positive news is ResMed shares continue to trade more than -19% below this broker’s downgraded price target. Plus Morgan Stanley continues to agree with just about every other analyst, while GLP-1s have reduced the terminal growth rate, the near-to-long term growth outlook continues to look positive.

It’s a shame all the positive achievements from the years past have not been a rewarding experience for shareholders who are now being asked to remain patient for longer. 

What To Buy Ahead Of June 30

Livewire Markets has asked me to contribute to their update on which stock(s) to Buy and to Sell ahead of June 30th.

Let’s start with the positive: which stock to Buy?

One of the companies that continues to have my conviction is Goodman Group ((GMG)).

Those shares peaked in early 2025 above $38 when exposure to data centres was the trade du jour and bottomed near $25 in March. It is yet again dawning upon local investors, the data centres build-out has a lot further to go and this company sits inside the sweet spot — globally.

There’s a lot more going on inside this company, with demand for industrial warehousing a positive too and so will be a shift in focus towards RBA rate cuts in 2027, but in the here and now the market’s focus very much lays with data centres and whether/when Goodman can announce fresh partnerships to build out its pipeline of work in progress.

Those partnerships will be announced. Management has been very clear and transparent about it at recent briefings with institutional investors. Negotiations are taking place.

It’s now but a matter of time.

Partnership announcements will act as a catalyst, all else remaining equal.

That $38 in early 2025 wasn’t wrong, it was probably more a case of: too early.

Bonus: investors looking for a ‘cheaper’ priced opportunity should consider SGH Ltd ((SGL)).

What Not To Buy (Sell) Ahead Of June 30

What not to Buy (Sell)?

FNArena data show more than 66% of all ratings for individual ASX-listed stocks by seven daily monitored stockbrokers is currently a Buy or equivalent with Neutral/Hold ratings on 27% and total Sells below 7%.

Those are shocking numbers, indicative of a heavily polarised share market in which momentum and narrow leadership are steering the index.

Add tax loss selling in June and there’s an outsized group of stocks that lacks momentum and attracts no lasting attention from investors or traders, no matter how cheap the valuation.

If history is our guide, some of the heaviest sold down, cheaply priced laggards might well see buying interest return in July. This includes many low quality, perennial disappointers.

This set-up asks a very important question from investors: what type are you?

If looking for a cheap entry into longer term performers, don’t jump on the lowest quality stocks. They won’t last the distance.

Names to avoid include Appen ((APX)), Bapcor ((BAP)), G8 Education ((GEM)), Healius ((HLS)), Inghams Group ((ING)), and Synlait Milk ((SM1)).

For (much) better alternatives: see higher up.

The FNArena-Vested Equities All-Weather Model Portfolio owns shares in ResMed, Goodman Group, and SGH Ltd.

My curated lists are 24/7 available to paying subscribers: https://fnarena.com/index.php/analysis-data/all-weather-stocks/

(Do note that, in line with all my analyses, appearances and presentations, all of the above names and calculations are provided for educational purposes only. Investors should always consult with their licensed investment advisor first, before making any decisions.)  

P.S. I – All paying members at FNArena are being reminded they can set an email alert for my Rudi’s View stories. Go to My Alerts (top bar of the website) and tick the box in front of ‘Rudi’s View’. You will receive an email alert every time a new Rudi’s View story has been published on the website. 

P.S. II – If you are reading this story through a third party distribution channel and you cannot see charts included, we apologise, but technical limitations are to blame.

FNArena Subscription

A subscription to FNArena (6 or 12 months) comes with an archive of Special Reports (20 since 2006); examples below.

Find out why FNArena subscribers like the service so much: “Your Feedback (Thank You)” – Warning this story contains unashamedly positive feedback on the service provided.

FNArena is proud about its track record and past achievements: Ten Years On

Click to view our Glossary of Financial Terms