Why Motley Fool Co-Founder David Gardner Likes ResMed Inc.

By Motley Fool Staff Markets Fool.com

In this segment fromRule Breaker Investing, Motley Fool co-founder David Gardner dives into one of five stocks that could earn a spot in your portfolio -- this time, he is looking at ResMed (NYSE: RMD). The medical device and software application provider helps people suffering from respiratory disorders. With sleep apnea underdiagnosed and undertreated, a long runway for growth lies ahead for the company.

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A full transcript follows the video.

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This podcast was recorded on April 19, 2017.

David Gardner:Stock number three. Stock number three isResMed. The ticker symbol is RMD. ResMed has a $10 billion market cap. The stock, as I speak, is trading at $68.86 or thereabouts. This is a company that, in its own words, is changing lives with every breath. This is aRule Breakersstock pick that I picked in the fall of last year.

The company's all about healthy sleep, and well-being, and respiratory care. It's a leader in what it does, and if you know of or perhaps suffer from sleep apnea, then you're going to appreciate what ResMed does. So for some of you, you know exactly what I mean when I see CPAP (C-P-A-P). This is a ventilator that people who have problems sleeping at night might be using. CPAP stands for "continuous positive airway pressure."

And basically it's just applying mild air pressure on a continuous basis to keep those airways open for people. Keep them able to breathe normally on their own as they sleep. So you're wearing the ventilator. It's got a tube. It's got a little unit next to your bedside.

That's the company's product. This company invented that product. In a sense invented an industry.

Now sleep apnea, which is a sad thing to think about (I don't have it, I hope you don't have it), is treatable. However (and this is bullish for this stock), it is underdiagnosed. It's undertreated and underdiagnosed in the United States of America, and you can bet if it is in the U.S. that it's even more so worldwide.

So this company has definitely a global opportunity as a leader. It does have some significant competition in the form of Philips Respironics, one of thosePhilipscompanies. Philips, of course, a conglomerate, so they're competing against a division of a larger company.

I like the focus of this company, which is just trying to do what we've described. It's also a stock that is a lower-risk pick for us for those who know our risk ratings. And I did a series on risk ratings that you can listen to from last year. You can see our risk rating. It's a three-part series teaching you about those. This company has a risk rating of just seven. That means it's a lower-risk company.

It also -- kind of like Axon Enterprise in another context -- has a cloud-based business, as well. It has cloud-based monitoring of its patients. So I like these data companies, as well. And yes, talk about a razor-and-blades business model, and this isn't the only company that has that that I'm featuring this week. In fact, TASER is one such and there will be another one coming shortly. But this company has its patients, yes, occasionally replacing their masks, or the tubing, or the filters, so it sells profitably lots of blades along with that razor.

So ResMed. A $10 billion company. I like it going forward. This is, pun intended (not trying to be cute, here) a sleepy stock. It's one of those that I think you can buy and just continue holding very patiently over the course of time and be rewarded with outsized market returns. We shall see.

David Gardner has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Axon Enterprise. The Motley Fool recommends ResMed. The Motley Fool has a disclosure policy.