A Valuable Treatment

Resmed was the first company under my coverage when I joined Montgomery and I’ve thoroughly enjoyed following the company for five years. Over this time, I’ve always been fascinated by the treatment of sleep apnea, and it’s helped shape my understanding of an important investing principle: To generate value, you don’t need to solve a problem, you just need to provide a solution that’s materially better than your competitors.

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ResMed Faces Challenges In FY16

Sleep and breathing specialist ResMed (RMD) delivered strong revenue growth in the September quarter. Sales in flow generators grew 20%, while masks were up 9% in the quarter after a flat performance through FY15. Subsequent quarters are expected to remain challenging given a key competitor, Philips, is launching new products and competitive bidding rolls out in the US from January 1.

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To The Victor

The fight for market share can be a long and bloody battle. The lucrative reward of market dominance, combined with the threat of obsolescence, spurns companies to engage in years, and even decades, of intense rivalry. But after competing for so long, it can be a small advance by one company which tips the balance and begins a positive feedback loop. Investors that can identify this tipping point may very well share in the spoils of the victor.

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