A Tough Day for ASX 200 Stocks: ResMed and Breville Shine Amidst the Decline

ASX 200 stocks are facing a challenging day, with losses seen across all sectors this Monday. It’s important to remember that markets operate in cycles, and for long-term investors, these downturns can present valuable opportunities.

The key to successful investing is buying a stake in high-quality businesses at prices lower than their actual worth. As Warren Buffett famously said, ‘Whether we’re talking about stocks or socks, I like buying quality merchandise when it is marked down.’

Even amidst the broader market decline, two companies stand out — ResMed and Breville Group. Both have significant market share in their areas and possess competitive advantages that are hard for others to match.

Despite the negative trend for most ASX 200 stocks, ResMed’s shares are holding strong, up 4.2% to $33.16 as of the latest update. The company recently reported a solid 9% revenue increase to US$1.2 billion, driven by high demand for their sleep devices and masks, essentially their core product line.

ResMed also saw an improvement in their gross margin, which increased by 3.5%. This is a positive sign, especially in today’s economic climate. Their board approved a dividend of US$0.53 per share, which reflects confidence in ongoing profitability.

Analysts at Macquarie have issued a buy rating for ResMed, with a price target set at $36.25 per share. They were impressed by the company’s current margins and optimistic financial guidance for FY 2025.

On the other hand, Breville Group’s shares are down just under 4% to $27.91. Although 2024 has been relatively quiet for Breville, analysts from Goldman Sachs rate it as a buy, giving it a price target of $30.00. This recent drop offers an increased upside potential of over 7%.

Goldman Sachs forecasts a 9% sales growth for Breville in the second half of FY 2024, driven by product sales in the US and improved performance in Europe and the Middle East. They believe Breville’s strong position in the premium coffee machine market provides substantial growth opportunities.

In a broader context, today’s decline in ASX 200 stocks correlates with the sell-off seen in US markets. Many big tech firms are facing scrutiny over potential recessions and interest rate concerns.

Warren Buffett’s recent decisions, including selling a considerable portion of Berkshire Hathaway’s stock and cutting down on Apple shares, have also not contributed positively to investor sentiment in tech stocks.

While some high-growth tech stocks, like Nvidia and Xero, have taken hits in share prices, they continue to perform well compared to year-ago levels. Overall, investors are seeing a crucial period that could reshape market dynamics.