Blendertrend

by Dan Robbins

I Could Have Peter Lynch'd This Stock

Permalink

Every market day, I receive an email from barchart.com with their chart of the day. It features a stock making a new high, which by definition, is a stock in a upward trend of course. In the introductory paragraph of the email, it said:

The “Chart of the Day” is ResMed (RMD), which showed up on Tuesday’s Barchart “All-Time High” list. ResMed on Tuesday posted a new all-time high of $43.48 and closed +1.07%. TrendSpotter has been long since Dec 11 at $42.08. In recent news on the stock, ResMed on Oct 25 reported fiscal Q1 EPS of 49 cents, above the consensus of 46 cents. ResMed, with a market cap of $6 billion, is a leading manufacturer and distributor of medical equipment for treating and diagnosing sleep disordered breathing. Sleep disordered breathing includes sleep apnea and related respiratory conditions.

I thought, “hey, I know this company, they make the CPAP machine I use.” Back in late 2007, I complained to my doctor about a variety of symptoms and he indicated that a sleep study was a wise course of action. I went to a sleep center, got hooked up to a bunch of sensors and had an awful night’s sleep. Upon leaving, I saw my technician who said, “I think we’ll be seeing you back soon Mr. Robbins!” Sure enough, I was called back for a follow-up night to use a CPAP machine and again hooked up to the sensors to measure for improvement. Boy did I have a great night sleep using the machine - sure I bit uncomfortable not being used to wearing the jet fighter looking mask but I wanted to take the machine home with me! I met with the sleep doctor soon after to find out my results. Without the CPAP machine, I suffered from sleep apnea and averaged an apnea event every other minute. The doctor said that was like someone taping my shoulder that frequently, so of course I wasn’t sleeping well. Of more serious concern with sleep apnea, is pauses in breathing, which caused, In my case, my oxygen saturation to drop dangerously close to the level that can induce a cardiac event. (Note: see your doctor if you think you might be at risk - this is serious stuff).

So to wrap up my story, in January 2008, I received my CPAP unit and having been using it ever since. I travel with it and I even take a battery pack when camping. Remember, sleep is awesome!.

Oh, Peter Lynch? Right, back to that. So he wrote a book after his time at the helm of the Fidelity Magellan mutual fund, called “One up on Wall Street.” In a nutshell, a major premise is that individuals can do better than Wall Street by investing in companies they experience around them. New store opening up that you like? Stayed at a hotel you really enjoyed? Bought a great device? etc… These are opportunities to invest in companies that may be growing, but under the radar of financial analysts and traders.

So here’s the weekly chart of ResMed $RMD since January 2008 when I first became aware of the company. Certainly the stock has done well in the 4 years overall but there were two prime trends that offered the most opportunity. See my notes in the chart. Furthermore, nice quarterly earnings growth too: Ycharts

Click for larger size

RMD - January 9th 2013

I’m going to write a post in the near future about this in the near future, but remember this: you can’t backtest your brain. Anybody can look at a historical chart and point out the best buy and sell points (as I did here) but that doesn’t make you money. It’s how you respond to the current chart situation and overall environment and manage the trade that does. I could have thought in 2008, “interesting company, their product really helps me, I wonder if they’re publicly traded?” That would have been my Peter Lynch moment for this stock. Sure, the right time to buy wasn’t until almost 18 months afterwards but it all starts with the idea.

$RMD on Stocktwits $RMD on Finviz $RMD on Ycharts

At the time I published this post, I didn’t own ResMed.

Comments