# COH - Cochlear Limited



## chops_a_must (13 February 2007)

Quite surprised not to be able to find a thread on this stock.

Anyway, missed out on an entry in the 54s on this this morning. Will wait for a pull back in the near term as the short term down trend continues.


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## wbooo (14 August 2007)

Hi

Looks like we are the only 2 people using this forum with an interest in stocks which go up and stay up, atleast over the longer term.  Hope you got your coh at 54 if you did you will be pleased with their results to day I have them on a valuation of between $70 and $75 for fy08.  I have been investing in coh forthe last 4 years, originally got in at $24, missed out on their low point of appx 18.80.  I will probably hold them for atleast another 2 years since I like both the product and Chris Roberts.

Are you a value investor?


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## BIG BWACULL (14 August 2007)

wbooo said:


> Hi
> 
> Looks like we are the only 2 people using this forum with an interest in stocks which go up and stay up, atleast over the longer term.  Hope you got your coh at 54 if you did you will be pleased with their results to day I have them on a valuation of between $70 and $75 for fy08.  I have been investing in coh forthe last 4 years, originally got in at $24, missed out on their low point of appx 18.80.  I will probably hold them for atleast another 2 years since I like both the product and Chris Roberts.
> 
> Are you a value investor?




SOMETIMES YOU HAVE TO SHOUT (Get it cochlear, shouting, hearing aids ) Sorry its not valued input Bye
Up $2.20, 3% trading at $64


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## chops_a_must (14 August 2007)

wbooo said:


> Hi
> 
> Looks like we are the only 2 people using this forum with an interest in stocks which go up and stay up, atleast over the longer term.  Hope you got your coh at 54 if you did you will be pleased with their results to day I have them on a valuation of between $70 and $75 for fy08.  I have been investing in coh forthe last 4 years, originally got in at $24, missed out on their low point of appx 18.80.  I will probably hold them for atleast another 2 years since I like both the product and Chris Roberts.
> 
> Are you a value investor?




No, mainly an ethical one. But biotechs generally do well in hard times... And even given the recent downside volatility, this has held up well, and now has an established uptrend.


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## wbooo (14 August 2007)

*biotech IDT-results just released*

record results just released (supposed to release tommorrow) eps up over 20%.

This company has been restructuring for the last few years and has managed to replace all its old business of generic drugs with a new business sector of new drugs, by providing research and development to the likes of Pfizer, not many analysts cover it, in fact I only know of one, at Macquarie for their high networth clients.

Anyway they have confirmed they expect double digit growth for next year too.  Things are looking up.


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## resourceboom (14 August 2007)

I got out last week as I think (hope) that I can use the funds better elsewhere.  Very sad, as this was a great share to hold for a few years, after picking up at 18.6

I was concerned they might not be able to keep up the growth, but with dual inplants being done more frequently and the large chinese order, they might, however its still a high p/e.  Anyway, all the best to holders!!


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## Birdster (22 February 2008)

I have bumped this to raise awareness to the fact COH has dropped, in a sharp move ever since the half yearly report. Link to ann(s)

http://www.asx.com.au/asx/statistic...oh&timeFrameSearchType=D&releasedDuringCode=3

Never been accused of fully understanding reports and accounts. But I don't see the grim news inbetween the profits and good news, other than losing money because the AUD is stronger. 

COH goes XD 25/2 (Mon) .70 yet it falls. 

Has anyone heard anything? (sorry, had to put the pun in )


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## rhinoceros (4 March 2008)

So any idea why Cochlear has dropped to 51.46 from almost 80?

Seemed it was growing steadily for a long time - is it a worthwhile buy now?


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## Judd (4 March 2008)

$A v $US nearing parity is hurting profits.  Same as CSL.  Usually affects all companies which earn most of their money overseas in $US.  Nothing abnormal or unusual about it.


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## ozambersand (4 March 2008)

> Cochlear has received a warning letter from the US Food and Drug Administration (FDA) relating to its Bone Anchored Solutions (BAS) division’s operations in Gothenburg Sweden - an import alert has been instituted prohibiting the distribution of BAHA products into the US. This had already been flagged as a possibility by the company.



 Credit Suisse via FNArena


> The broker has reviewed FDA's Section 520(f) relating to the warning letter received by the company banning admission of Baha products into the US and noted that it does not address issues relating to the safety or effectiveness of the device but rather the facilities and controls around manufacturing practices.



 Citi via FNArena
This had been mentioned by management and according to most brokers is  supposedly not a cause for concern, however it may be contributing to the drop (as well as the exchange rate).


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## michael_selway (4 March 2008)

Judd said:


> $A v $US nearing parity is hurting profits.  Same as CSL.  Usually affects all companies which earn most of their money overseas in $US.  Nothing abnormal or unusual about it.




Yeah thats true actually

*Earnings and Dividends Forecast (cents per share) 
2007 2008 2009 2010 
EPS 180.1 216.3 255.1 298.8 
DPS 125.0 150.0 174.4 205.0 *



> Date: 20/2/2008
> Author: Fiona Tyndall
> Source: The Australian Financial Review --- Page: 35
> Australian hearing device maker, Cochlear, expects to meet its earnings forecastfor 2007-08. It has posted revenue of $A298 million for the six months to 31December 2007, a rise of eight per cent. Its sales in the US were lower thanexpected, prompting a fall in its share price. Analysts believe that thecompany's prospects are good, but there is not likely to be any trigger toimprove its share price in the short-term
> ...




thx

MS


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## Stefan_Sweden (13 June 2008)

What is happening with this stock???

It just hit a new record low. (52week)

Why?

I cant find any bad news coming thru...no news at all to be honest.


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## MRC & Co (13 June 2008)

Haven't looked at news (you will find most news on a platform like E-trade) but that volume today was HUGE!  On a mother of a downtrend!  However, closed off the low of the day, so tomorrow should be very interesting!  Another selloff and this one is in trouble!


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## Fab (22 June 2008)

Keeps on falling . No reason in my mind to explain that. Closed under $45 which is a bit worrying. Having said that COH is getting very close to a very very low RSI so will probably bounce back from the sell off that I am assuming will happen tomorrow. Might be a good buying day tomorrow


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## michael_selway (22 June 2008)

Fab said:


> Keeps on falling . No reason in my mind to explain that. Closed under $45 which is a bit worrying. Having said that COH is getting very close to a very very low RSI so will probably bounce back from the sell off that I am assuming will happen tomorrow. Might be a good buying day tomorrow




Hi yeah a bit too expenseive still, $40 is about right i think 

*Earnings and Dividends Forecast (cents per share) 
2007 2008 2009 2010 
EPS 180.1 213.7 249.8 282.5 
DPS 125.0 149.5 173.7 194.5 *

thx

MS


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## Fab (22 June 2008)

michael_selway said:


> Hi yeah a bit too expenseive still, $40 is about right i think
> 
> *Earnings and Dividends Forecast (cents per share)
> 2007 2008 2009 2010
> ...




Looks like EPS is forecast to grow until 2010 so looks good to me and probably a bit of a defensive stock as well. Interesting that it is almost half the price of its all time high around $80. I can't see why COH would not bounce back at some stage. I think it is being dragged down by the current bearish sentiment


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## urgalzmine (22 June 2008)

Fab said:


> Looks like EPS is forecast to grow until 2010 so looks good to me and probably a bit of a defensive stock as well. Interesting that it is almost half the price of its all time high around $80. I can't see why COH would not bounce back at some stage. I think it is being dragged down by the current bearish sentiment




they have got some problems with the high aus dollar cutting their profits and also some patent problems. they had the United States Food and Drug Administration (FDA) send a letter to them in regards to COh products coming out of Sweden to USA. 

They all seem to be temporary but we haven't had any updates. 

However having said that its sp of $44 is the lowest it ever has been in regards to PE ratio;s


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## Fab (24 June 2008)

Thanks for that update. Dropping again today. The RSI says screaming buy in my opinion. The problem with stock in a downtrend is to know when it will stop.

I still believe COH is a very good stock with high growth potential but short term bad news.


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## urgalzmine (24 June 2008)

Fab said:


> Thanks for that update. Dropping again today. The RSI says screaming buy in my opinion. The problem with stock in a downtrend is to know when it will stop.
> 
> I still believe COH is a very good stock with high growth potential but short term bad news.




Yeh i agree, but there are so many bargains out there its just ridiculous. I mean have a look at the banks all have PE ratio's around 10 and divs of about 6-7%


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## nth brisbanite (5 December 2008)

Anyone got an update on this stock?  Has done well long term, very little debt, still fairly resilient even during the current downturn


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## Lachlan6 (12 January 2009)

I have placed COH in the larger corrective wave B. Notice the recent choppy move down from early October is finding some traction in the typical area for the wave B. The wave A didn't quite make it to the typical area for an A,B,C area so we may get some more bounce in the stock but this depends on what the overall market does. A bounce should see the stock move to $61.50 - $66.00. However this will most likely be invalidated with a move back through $48.00.


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## Aussiest (14 April 2009)

I've never really understood this stock. Why would anybody want to buy a $50.00 stock that only pays $1.60 dividends per year?


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## UBIQUITOUS (14 April 2009)

Aussiest said:


> I've never really understood this stock. Why would anybody want to buy a $50.00 stock that only pays $1.60 dividends per year?





The same reason that property investors are happy to make a yearly income loss on their investment property i.e capital growth.

Looking at the history of COH, it seems as though investors have been well rewarded.


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## TraderPaul (17 April 2009)

Hi folks,

COH ..... some astroanalysis to the end of June 2009 ..... 

..... was expecting some minor news earlier this week, but
it hasn't surfaced, as yet.

28-29042009 ..... minor and positive light on COH

04052009 ..... significant and positive cycle

11-12052009 ..... positive time cycle ... finance-related ???

2905-01062009 ..... minor and positive cycle, here.

12-16062009 ..... 2 minor time cycles come together - finances?

19-22062009 ..... minor and positive news expected here

29-30062009 ..... negative spotlight on COH

have a great day

paul



=====


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## pedrod (21 August 2009)

So are we looking at a breakout on the weekly chart? I have a price target of $66 on COH on the weekly chart. It will be interesting to see todays close. I'm looking for a $59.50-$60 close. That would be positive.


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## McCoy Pauley (24 January 2010)

Cochlear mentioned in dispatches as a potential suitor for buying Siemens' hearing aid business, having partnered up with Hellman & Friedman and KKR on a joint bid.  Three other private equity firms are working on separate bids for the unit, which sells one in four hearing aids in the world.

http://www.theage.com.au/business/cochlear-seen-as-suitor-for-siemens-unit-20100123-mr3b.html

Disc - hold COH.


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## Atomic (25 January 2010)

Someone asked why buy a company which has poor divvi's, my answer is just for the greater good. 
 this company has developed and delivered some/most of the worlds ground breaking humanitrium technology as far as sound and hearing perception for infants through to adults and seniors.

my wife and i had a son 11yrs ago, 3 months premature. downs , aspergers , autism and all the learning and developmental difficulties thrown in and hearing problems to boot. at the time i asked my wife if we could afford a cochlear implant and her response was we cant afford not too!!!!

So my point her is any and all support of companies with this type of product at any price is for the greater good as they immensly improve our existence.
i hear cochlear is on the eve of sight recognition and repair technologies for the blind. they have results in shades of grey and large blocks of of shapes.

conclusion is that i dont have a crystal ball but i rekon cochlear is going to make one for us all !!!!!!!!!!!!!!!!!!!!


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## skc (25 January 2010)

Atomic said:


> Someone asked why buy a company which has poor divvi's, my answer is just for the greater good.
> this company has developed and delivered some/most of the worlds ground breaking humanitrium technology as far as sound and hearing perception for infants through to adults and seniors.
> 
> my wife and i had a son 11yrs ago, 3 months premature. downs , aspergers , autism and all the learning and developmental difficulties thrown in and hearing problems to boot. at the time i asked my wife if we could afford a cochlear implant and her response was we cant afford not too!!!!
> ...




That is very noble of you Atomic... but you do realise that the share market is a secondary market and investor's decision to buy shares in COH on the ASX has relatively minor impact to the operations of COH.

The only thing a higher share price do to COH itself is when they want fresh new capital they can tap the market at higher prices.


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## McCoy Pauley (9 February 2010)

I've had a quick read through the half-year report for the 1H10 and I'm Big Kev'ed!

Highlights:

* Total revenues were $347.6 million, down 2% on the corresponding period but if adjusted for currency fluctuations, sales were up 4% compared to H1 F09 and 7% to H2 
* EBIT up 7% to $107.3 million.
* Profit from ordinary activities after tax attributable to members up 8% to $75.3 million.
* Basic EPS up 7% to $1.34 per share
* Interim dividend of 95c per share
* Net tangible assets per share as at 31/12/09 up 206%! 

http://www.asx.com.au/asxpdf/20100209/pdf/31nlp003hl77r7.pdf

I hold, so DYOR.


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## McCoy Pauley (17 March 2010)

The AFR reported today that it appeared that COH's bid for Siemens hearing aid division fell short of Siemens' expectations and that no sale would be going through anyway.

Seemingly in response, COH's share price surged $1.91 today.


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## McCoy Pauley (22 March 2010)

COH back above $70 and a new 52-week high despite a market falling overall.  As a long-term holder of this company, I'm very pleased.  Looks like the news that COH's bid for Siemens and the announcement of the new chairperson has excited the market.


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## McCoy Pauley (10 August 2010)

Net profit rises 19% for the full year and COH announces a final dividend of 105c per share.

The sting in the tail is the reduction in the franking rate from 100% to 60%.

I've held COH shares since COH floated and I do not ever remember COH paying partly franked dividends.  Looks like the market didn't like the sting in the tail and sold off COH accordingly.


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## McCoy Pauley (9 August 2011)

Full year report releasd to the market this morning and despite Cochlear growing NPAT by 16% year-on-year, investors do not want a bar of it, and Cochlear is sold down strongly again today. From a peak of $85.00/share in April, it's down about 25% and still falling.

COH announced a dividend of $1.05/share, with an ex-dividend date of 1 September 2011, to be paid on 22 September 2011.  The dividend is franked at 70%.

The decrease in COH's share price brings it a lot closer to the intrinsic value I've calculated but it still exceeds my calculated intrinsic value.


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## pixel (9 August 2011)

McCoy Pauley said:


> Full year report releasd to the market this morning and despite Cochlear growing NPAT by 16% year-on-year, investors do not want a bar of it, and Cochlear is sold down strongly again today. From a peak of $85.00/share in April, it's down about 25% and still falling.
> 
> COH announced a dividend of $1.05/share, with an ex-dividend date of 1 September 2011, to be paid on 22 September 2011.  The dividend is franked at 70%.
> 
> The decrease in COH's share price brings it a lot closer to the intrinsic value I've calculated but it still exceeds my calculated intrinsic value.



 Hi McCoy,

Can't let you suffer in here all on your lonesome. I made a couple of brief swing trades in July and kept COH on my watchlist. Like you, I was a little surprised that the market didn't react more positively to a good Financial result. But then again - what's logical on a day like today?

From a technical perspective, I found that today's Low bounced strongly off a falling trendline that started life as resistance between mid-May and early July, when it was broken and became support - as happens quite commonly. A Trader with true steel balls - and the necessary cash at the ready - might have taken a punt in the low $63's.
Neither of those attributes describes me very well, therefore I'll wait and see what tomorrow brings. If today's doji finds follow-through, even a small gap-up, I'll start building a new position.


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## McCoy Pauley (10 August 2011)

Thanks pixel. Not feeling lonely at present, just feeling very happy that COH has turned in another excellent full year performance, despite the headwinds of a sagging US economy and a high Australian dollar compared to the US dollar.

I hold, so DYOR.


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## McCoy Pauley (10 August 2011)

Looks like people got around to reading COH's annual report.  What a pop - up almost 6.5% on the day.


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## Dutchy3 (29 August 2011)

Hi .... Lovely on the close ... quick run back to 83.50ish for around 8.5%


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## McCoy Pauley (12 September 2011)

COH announces a voluntary recall of its Nucleus CI500 Cochlear Implant range as a result of an increased failure rate and to allow COH to investigate the causes of the failure. It won't affect those recipients already holding those implants.

COH looks like it will fall at least 12% on open this morning.

ETA - opened at $55.26/share. A drop of 23.4%.  Buffett's line about how reputation can be built over 20 years and lost in five minutes never held more sway than this morning, as I believe this is the first time in its history COH has had a product recall.


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## Chasero (12 September 2011)

McCoy Pauley said:


> COH announces a voluntary recall of its Nucleus CI500 Cochlear Implant range as a result of an increased failure rate and to allow COH to investigate the causes of the failure. It won't affect those recipients already holding those implants.
> 
> COH looks like it will fall at least 12% on open this morning.
> 
> ETA - opened at $55.26/share. A drop of 23.4%.  Buffett's line about how reputation can be built over 20 years and lost in five minutes never held more sway than this morning, as I believe this is the first time in its history COH has had a product recall.




I jumped in @ $56.80, kinda scary how the market reacted.

But heeding some investment advice I've found online, the best time to buy a company is at times like this...


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## AngusSmart (12 September 2011)

I bought in with a small parcel today too, why the hell not huh. there's value in today for sure..

Debt free recently also..


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## McCoy Pauley (14 September 2011)

Yesterday's bounce looks like it was a dead cat bounce. Down 6% and still falling this morning.

ETA - found the probable reason. A rival of COH announced the US launch of its new model. Perfectly timed to take advantage of COH's recall.


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## skc (14 September 2011)

McCoy Pauley said:


> Yesterday's bounce looks like it was a dead cat bounce. Down 6% and still falling this morning.




No shortage of buyers but the sellers are un-relenting. Down ~8% now.

COH traded on a high PE ~18 and the PE compression alone will bring them down to a pretty ugly level. EPS $3.2 @ say 14x = $45 . And that hasn't even take into account any loss in earnings...


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## McCoy Pauley (14 September 2011)

skc said:


> No shortage of buyers but the sellers are un-relenting. Down ~8% now.
> 
> COH traded on a high PE ~18 and the PE compression alone will bring them down to a pretty ugly level. EPS $3.2 @ say 14x = $45 . And that hasn't even take into account any loss in earnings...




I wouldn't mind a piece of COH at $45/share. That would put it at the same level as back in the depths of the GFC.  

Volume has spiked on COH this morning. Lot of sellers rushing for the exits this morning.  

The P/E ratio was extremely high - pushed above 20x earlier this year. The recall signals a likely end to the high growth period of COH, at least for a few years, whilst COH deals with the reputational hit delivered by the recall.  But as Malcolm Maiden pointed out on Monday, it's not the first time COH has dealt with issues dealing with reputation and, in the long run, by being so cautious, it might actually benefit COH to have announced the voluntary recall.  That's speculative, simply because COH doesn't know why there has been an increased failure rate with the Nucleus 5 line of implants, but being so proactive, there's a chance that COH can spin the recall to its advantage in the next few years.

As an extremely long-term (15+ years and counting) holder, I don't like to see the reduction in my holding, but depending on how far the price falls, this could be a great time to pick up a well-run company on the cheap.


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## notting (14 September 2011)

McCoy Pauley said:


> ETA - found the probable reason. A rival of COH announced the US launch of its new model. Perfectly timed to take advantage of COH's recall.




Yeah but I think they are doing the recall with an instant replacement leaving no room for an alternative to take advantage of the recall.
COH can swing pretty wildly. In isolation the recall is not a big deal.  
The real issue is reputation and FDA scrutiny.  May not be a huge deal as FDA is reportedly not necessary as COH stepped in prior to them becoming involved.
I should add that I have been buying it.


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## McCoy Pauley (14 September 2011)

notting said:


> Yeah but I think they are doing the recall with an instant replacement leaving no room for an alternative to take advantage of the recall.
> COH can swing pretty wildly. In isolation the recall is not a big deal.
> The real issue is reputation and FDA scrutiny.  May not be a huge deal as FDA is reportedly not necessary as COH stepped in prior to them becoming involved.
> I should add that I have been buying it.




The commentary I've read suggests that COH has to revert to an older model of its implant and that COH is not enforcing contracts to implant that older model. Surgeons will now be free to select implants offered by COH's rivals, which is why sellers are rushing to dump the stock today, because one of COH's rivals cannily announced a new model. COH also needs to start manufacturing the older model as COH doesn't apparently have many models in stock.

As I wrote earlier, the recall may not have that great an effect on COH in the long term, but given that it's the first recall in about 15 years, it certainly has a short-term reputational hit on COH. I recall attending a Bionic Ear Institute seminar last year during Engineering Week where the presenter (who worked with COH in its early years) noted that many of COH's competitors were plagued by recalls, but COH was not. I think that makes up a fair amount of COH's promotional materials, so that will need to be changed!


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## skc (14 September 2011)

McCoy Pauley said:


> I wouldn't mind a piece of COH at $45/share. That would put it at the same level as back in the depths of the GFC.




What has that got to do with anything?!



McCoy Pauley said:


> The P/E ratio was extremely high - pushed above 20x earlier this year. The recall signals a likely end to the high growth period of COH, at least for a few years, whilst COH deals with the reputational hit delivered by the recall.




COH had ~70% market share at the expense of their competitor's recall... now the shoe is on the other foot. Their future market share will really depends on how well / not well their competitor capitalise on this opportunity. Ultimately all players can only grow at the industry growth rate... anyone seen any projection on those?



notting said:


> Yeah but I think they are doing the recall with an instant replacement leaving no room for an alternative to take advantage of the recall.
> COH can swing pretty wildly. In isolation the recall is not a big deal.
> The real issue is reputation and FDA scrutiny.  May not be a huge deal as FDA is reportedly not necessary as COH stepped in prior to them becoming involved.
> I should add that I have been buying it.




Where did you read about instant replacement? I didn't think they have enough of the other model stockpiled for occassions like these...

I think there will be plenty of time to buy later when they announce the actual financial impact of this event. At $40 probably the worst case is priced in... but now I don't see the market as over-reacting yet imo.


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## McLovin (14 September 2011)

skc said:


> No shortage of buyers but the sellers are un-relenting. Down ~8% now.
> 
> COH traded on a high PE ~18 and the PE compression alone will bring them down to a pretty ugly level. EPS $3.2 @ say 14x = $45 . And that hasn't even take into account any loss in earnings...




I bought a bit on Monday expecting a bounce yesterday, it was smaller than I thought but I sold, happily.

I think you're spot on about PE compression, they had a big "never do anything wrong" premium built in which could go the way of the dodo. Having said that, I remember a case study about product recalls and J&J did one in the 80s because they were being super cautious and it actually improved their brand. I don't think this a company killer.


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## McCoy Pauley (14 September 2011)

skc said:


> What has that got to do with anything?!




okay..... Thought it fairly obvious - just giving some price history.



			
				skc said:
			
		

> COH had ~70% market share at the expense of their competitor's recall... now the shoe is on the other foot. Their future market share will really depends on how well / not well their competitor capitalise on this opportunity. Ultimately all players can only grow at the industry growth rate... anyone seen any projection on those?




COH had about 65% market share before its competitor issued a recall.  COH has consistently had the most technologically advanced and reliable cochlear implant on the market for years.  To attribute COH's high market share to mis-steps from its competitors understates the technological edge COH built for itself over many years of research and development.

COH invests a considerable amount into its research and development each year. The recalled model was the thinnest and lightest implant ever devised, apparently.

Cochlear implants, of all varieties, also have little to no ability to permit the implanted to listen to music in the manner in which a person with normal hearing can listen to music. It's the holy grail of cochlear implants. The manufacturer that first brings to market an implant that allows the implanted to listen to music like most people with normal hearing will make a killing.

Saying that all industry players grow at the "industry growth rate" neglects the potential for further technological breakthroughs. 



			
				skc said:
			
		

> Where did you read about instant replacement? I didn't think they have enough of the other model stockpiled for occassions like these...
> 
> I think there will be plenty of time to buy later when they announce the actual financial impact of this event. At $40 probably the worst case is priced in... but now I don't see the market as over-reacting yet imo.




Agreed.  The recalled model was COH's flagship model, I believe. There will be a potentially significant short-term hit to COH's bottom line.


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## skc (14 September 2011)

McCoy Pauley said:


> okay..... Thought it fairly obvious - just giving some price history.




My point was price history means little as the new news is new!



McCoy Pauley said:


> COH had about 65% market share before its competitor issued a recall.  COH has consistently had the most technologically advanced cochlear implant on the market for years.  To attribute COH's high market share to mis-steps from its competitors understates the technological edge COH built for itself over many years of research and development.




Yes COH has good products but at the same time they benefited (albeit unquantifiable) from the competitors perils. It's one of those hypotehticals that we would never know. 



McCoy Pauley said:


> Saying that all industry players grow at the "industry growth rate" neglects the potential for further technological breakthroughs.




It's just depends on the definition of the industry... and if such projections capture possibilities of future tech breakthrough. Does the COH price premium include an element of "future technological breakthrough"? Dunno...

While I might sound very negative I am just flushing out my own thoughts and trying to see where a "safe" entry point is for my risk-adverse investment style.

Without further clarifications from management I would not buy until it's say 25% below a pessimistic scenario of $40. But if I did hold I would probably reduce exposure rather than selling out right, and certainly not buy more.

COH is a fantastic Australian success story and I wish them continued success, but my wish isn't enough to influence the potential risks in the situation.

Just broken $55...


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## craft (14 September 2011)

skc said:


> there will be plenty of time to buy.



 I have never seen a long term bargain where this has not been the case. Unless you are a trader - I reckon the ‘urge’ to jump on a bargain before it disappears carries a significant message to be patient and give yourself time and room to evaluate developments.


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## vkdirector (14 September 2011)

Below $52 and does not look like there is a lot of support at the moment, I will be watching this stock for a while as i am not real keen on trying to catch a failing knife so will wait till most of the hyp around the stock settles down a bit.


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## McCoy Pauley (14 September 2011)

A new 52-week low made this afternoon.  Very bearish day - down almost 15% now, and still dropping.


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## McLovin (14 September 2011)

craft said:


> I have never seen a long term bargain where this has not been the case. Unless you are a trader - I reckon the ‘urge’ to jump on a bargain before it disappears carries a significant message to be patient and give yourself time and room to evaluate developments.




Exactly, it's not like COH is really a "bargain" yet anyway. It's got a nosebleed PE that needs adjusting, as skc pointed out earlier. 

Even a long term investor would be game to stick their neck out now and start buying; let the dust settle and let the company give some sort of guidance on what this will mean for the bottom line. They were pretty opaque in the announcement which leads me to believe they either don't know (possible) or they are being conservative and want to underpromise and over deliver (probable).


----------



## McCoy Pauley (14 September 2011)

skc said:


> My point was price history means little as the new news is new!




Fair enough.



			
				skc said:
			
		

> Yes COH has good products but at the same time they benefited (albeit unquantifiable) from the competitors perils. It's one of those hypotehticals that we would never know.




There's no doubt that COH's revenue, profits and share price benefited from the fact that COH had the most reliable product on the market and that their competitors were forever dealing with product recalls and the regulators.

Now that COH has issued its own product recall, that point of differentiation has now disappeared and COH will be brought back into the pack. One bright spot is that COH wasn't forced into the recall by the regulators, unlike some of its competitors.



			
				skc said:
			
		

> It's just depends on the definition of the industry... and if such projections capture possibilities of future tech breakthrough. Does the COH price premium include an element of "future technological breakthrough"? Dunno...




I agree that COH's high price reflected a high expectation for a strong rate of growth into the future.  COH never predicted what would happen in the future when it reported results, but the market developed an expectation that it would consistently outperform previous years.

Some of the expectation would be centred around developments flowing from COH's heavy investment in research and development.  Optimistically, the bearish sentiment on COH might be so bad that such expectation would be stripped out of the share price and if COH continues to develop its new and innovative products and recapture the market share it will lose over the recall, then that might put a rocket under the share price.

However, that's only speculation and to buy COH shares on that would be speculating on COH's future performance.  Until and unless COH release further information about the recall's impact on COH performance, it's just guessing.



			
				skc said:
			
		

> While I might sound very negative I am just flushing out my own thoughts and trying to see where a "safe" entry point is for my risk-adverse investment style.
> 
> Without further clarifications from management I would not buy until it's say 25% below a pessimistic scenario of $40. But if I did hold I would probably reduce exposure rather than selling out right, and certainly not buy more.
> 
> ...




My position is somewhat different, as the yield on my investment in COH approaches 100%.  I couldn't find a better yielding stock to replace COH anywhere on the market and I'm not inclined to give the taxman a slice of my capital gains, either.

At the moment, COH is probably approaching what I consider to be its fair value on its released figures as at 30 June 2011, but given the financial impact of the recall on its 2011/2012 results, I'm waiting for more information before determining whether to buy more, and if so, at what level.


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## McLovin (14 September 2011)

McCoy Pauley said:


> Now that COH has issued its own product recall, that point of differentiation has now disappeared and COH will be brought back into the pack. One bright spot is that COH wasn't forced into the recall by the regulators, unlike some of its competitors.




As well as that, in the instance of Sonova's HiRes 90K devices they were actually causing severe pain in patients when they malfunctioned. A very important difference to the COH devices which automatically shut down. Technology fails every now and then, doctors accept that. The real test is how the company manages the recall, not the recall itself.  

I heard a few audiologists being interviewed this morning and they didn't consider it something that would turn them off COH products.


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## skc (15 September 2011)

McLovin said:


> As well as that, in the instance of Sonova's HiRes 90K devices they were actually causing severe pain in patients when they malfunctioned. A very important difference to the COH devices which automatically shut down. Technology fails every now and then, doctors accept that. The real test is how the company manages the recall, not the recall itself.
> 
> I heard a few audiologists being interviewed this morning and they didn't consider it something that would turn them off COH products.




I was having a chat with a doctor and she didn't seem to concerned wrt reputational damage either... but most doctors I know knew very little in way of finance and investments let alone stock valuation ...

COH dipped below $50 and now clinging on by a few hair... probably at the mercy of the wider market whether it holds that level today...


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## McCoy Pauley (15 September 2011)

There was a rally this morning along the lines of the broader rally, but that's fizzled out and COH is now down another 2% so far. I wonder how much of the rally was driven by Eureka Report subscribers reading Roger Montgomery's article on COH in last night's newsletter and then recalling that he recommended MCE for months!


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## McLovin (15 September 2011)

skc said:


> I was having a chat with a doctor and she didn't seem to concerned wrt reputational damage either... but most doctors I know knew very little in way of finance and investments let alone stock valuation ...




Perhaps in this instance that might be a good thing? 

I'm trying to tee up a phone chat with someone I know who used to be pretty high up (in sales too) at COH to see what they have to say about the recall. I think they're away atm though. If I can get on to them I'll post their thoughts on here.


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## notting (15 September 2011)

Toyota was making cars that accelerated people out of control!!!!
This is nothing!

I heard COH had instant replacements on TV, it may be wrong I have not seen anything that confirms it.  It sounds wrong because it's an entire line that has an issue and they are still working out what the issue is so I think I might have said the wrong thing with regard to that.  Sorry.


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## Roberto (1 October 2011)

McCoy Pauley said:


> Fair enough.




No, no, no, not fair enough, what do you mean SKC that price history is meaningless!
So you are a fundamentals only person? And an EMH person? Good luck with trying to make sense of the market by over simplifying things.


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## robusta (1 October 2011)

Picked up some COH yesterday @ $45.85 There is still a lot of uncertainty in the short term with the recall but this is one stock that I am happy to put in the bottom drawer with the confidence that in 5-10 years profits will be much larger than today.

A nice rising dividend yield will also be a bonus.


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## ROE (1 October 2011)

robusta said:


> Picked up some COH yesterday @ $45.85 There is still a lot of uncertainty in the short term with the recall but this is one stock that I am happy to put in the bottom drawer with the confidence that in 5-10 years profits will be much larger than today.
> 
> A nice rising dividend yield will also be a bonus.




I'm a little upset COH options doesnt exist any more ...well it did exist but not much liquidity and they pulled the plug on ASX last week...

during the recent madness you can get $10 premium for $45 strike price
make your buy price on COH $35 bucks  if **** happen ....

1000 shares earns me 10K premium...

I only prepare to buy COH in their 30's so that suit me fine... any other price I leave it to mr Market


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## McCoy Pauley (4 October 2011)

Big gap down this morning. Looks like sub $45/share is on the cards.  More and more brokers are downgrading their recommendations to "sell" on COH.  Playing around with charts as a novice technical person suggests that ~$45/share is a support level for COH and a break beneath ~$45/share might spark some severe selling.


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## robusta (4 October 2011)

McCoy Pauley said:


> Big gap down this morning. Looks like sub $45/share is on the cards.  More and more brokers are downgrading their recommendations to "sell" on COH.  Playing around with charts as a novice technical person suggests that ~$45/share is a support level for COH and a break beneath ~$45/share might spark some severe selling.




Maybe you are right, with broker reports like this.

http://www.businessweek.com/news/20...-costs-may-exceeed-a-35-million-ubs-says.html

COH made ~$180 million NPAT last financial year. The $35 million does not bother me as long as COH maintains market leader status and growth into the future.

Still happy I bought @ $45.85 a few days ago.


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## notting (4 October 2011)

Going to make a fortune out of this one when it turns.  When.  
One I'd feel confident to bet everything on.  
Not yet however.


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## McCoy Pauley (5 October 2011)

robusta said:


> Maybe you are right, with broker reports like this.
> 
> http://www.businessweek.com/news/20...-costs-may-exceeed-a-35-million-ubs-says.html
> 
> ...




I think that's the broker downgrade which sparked the sell-off yesterday morning. The losses were trimmed as the afternoon wore on and last I checked, COH was up this morning (though not as much as the market overall).

FWIW, the brokers are simply guessing at what they think the recall will cost.  COH advised shareholders late last month that they expect to update the market on the cost of the recall at the AGM later this month.  Brokers need to write something to fill their reports to their clients.  The upside risk is that the recall costs COH not very much at all and the share price spikes in response; the downside risk is that COH still cannot advise the market of the cause of the recall and therefore its costs.

I recall reading yesterday that COH believes the fault is being caused by moisture seeping into the implant.  I think this was in a summary of a broker recommendation re-published by FN Arena.


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## notting (5 October 2011)

Looks a little better. 
However tomorrow could be the day the US becomes officially a bear market so I'm not moving yet.


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## robusta (5 October 2011)

McCoy Pauley said:


> I think that's the broker downgrade which sparked the sell-off yesterday morning. The losses were trimmed as the afternoon wore on and last I checked, COH was up this morning (though not as much as the market overall).
> 
> FWIW, the brokers are simply guessing at what they think the recall will cost.  COH advised shareholders late last month that they expect to update the market on the cost of the recall at the AGM later this month.  Brokers need to write something to fill their reports to their clients.  The upside risk is that the recall costs COH not very much at all and the share price spikes in response; the downside risk is that COH still cannot advise the market of the cause of the recall and therefore its costs.




Agree with you regarding brokers, COH has gone from Buy to Sell and IMO will go back to BUY again in the future.




McCoy Pauley said:


> I recall reading yesterday that COH believes the fault is being caused by moisture seeping into the implant.  I think this was in a summary of a broker recommendation re-published by FN Arena.




Thankyou for that, I think this may be the same story in The Australian

http://www.theaustralian.com.au/bus...ant-malfunctions/story-fn91v9q3-1226158493439


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## McCoy Pauley (14 October 2011)

It looks to me like that $45/share level has held firm.  Big bounce this morning of more than 5% so far on no news.  That makes me a little suspicious.


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## GRYPHON80 (14 October 2011)

McCoy Pauley said:


> It looks to me like that $45/share level has held firm.  Big bounce this morning of more than 5% so far on no news.  That makes me a little suspicious.





This is my theory, with the volatility in the market investors that bought in today considered Cochlear is undervalued (to where it was before the crash) & safer option to other stocks in other sectors. Past week it has been trending up while others have been up & down. Good Defensive stock that looks like it has it's investor confidence back. If we get good news out of Europe & the US today & it does not drop on Monday I think it has turned the corner & who ever is on it should enjoy the ride.


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## McCoy Pauley (18 October 2011)

AGM held this morning.  The Chairman reports that the estimated cost of the voluntary recall will be between A$130-A$150 million and the after tax cash impact will be in the range of A$20-A$30 million.  COH won't know the precise cost of the recall until the end of calendar 2011.

That's because COH doesn't appear to know precisely why the implants are failing.

The board has decided to increase the first-half dividend to A$1.20/share, partly franked.

COH's share price is down around 5.0% this morning.


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## McCoy Pauley (19 October 2011)

COH closed only about ~1% lower yesterday after all that and it's basically recouped everything it lost yesterday so far this morning.


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## robusta (21 October 2011)

robusta said:


> Picked up some COH yesterday @ $45.85 There is still a lot of uncertainty in the short term with the recall but this is one stock that I am happy to put in the bottom drawer with the confidence that in 5-10 years profits will be much larger than today.
> 
> A nice rising dividend yield will also be a bonus.




SP $57.98 today, I am fairly happy however I do wish I threw everything into COH 20 days ago.


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## McLovin (22 October 2011)

I started buying this last Friday, I didnt think it would turn as hard as it has. I'm still only about half filled but I'll wait for a pullback before I buy anymore.


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## McCoy Pauley (22 October 2011)

It's been a tremendous bounce over the last few weeks or so. I picked up some more COH shares at $48.90/share and I wish I'd thrown some more money at it (although, to be practical about it, I spent enough on COH).

Given that the chart has almost gone in a vertical line, I'm cautious about a severe pull-back though.


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## notting (22 October 2011)

Personally I don't think there will be a pause till it's kissing 60 and even then I'm talking pause.


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## Mr Editor (23 October 2011)

robusta said:


> Picked up some COH yesterday @ $45.85 There is still a lot of uncertainty in the short term with the recall but this is one stock that I am happy to put in the bottom drawer with the confidence that in 5-10 years profits will be much larger than today.
> 
> A nice rising dividend yield will also be a bonus.




Congrats, you picked up Cochlear at probably the last time it'll be at that price. I would've bought some if I were quicker.

Cochlear was oversold so much, but since management are being really ambiguous about the details of the recall, I'm going to hold off buying for a bit. In the long-term though, this is just going to be a tiny blip in the share price


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## McLovin (24 October 2011)

Mr Editor said:


> Congrats, you picked up Cochlear at probably the last time it'll be at that price. I would've bought some if I were quicker.
> 
> Cochlear was oversold so much, *but since management are being really ambiguous about the details of the recall*, I'm going to hold off buying for a bit. In the long-term though, this is just going to be a tiny blip in the share price




[my bolding] 

Your blog appears to contradict your post...



> Critics were at their most vocal on the day immediately following the announcement of the recall, when details on the recall were very ambiguous. But now that management has a clear idea of the total expenses of this entire fiasco, the element of risk that many were fearful of has been mitigated.




Good blog too. 

Looking at my notes on COH there a lot of the same points as in your blog post. So I guess we're either both wrong or both right!


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## Mr Editor (24 October 2011)

McLovin said:


> [my bolding]
> 
> Your blog appears to contradict your post...
> 
> ...




Thanks for pointing out that inconsistency, though what I meant is that while management has an idea of the expenses of a 1% failure rate of the CI512 product, they haven't even mentioned what exactly is the failure rate now. What do they estimate it to be? Could these failures be merely a precursor of many more? Does management's $130-$150 million provision take these questions into account? These are lingering questions that make me hesitant to buy right now.

And besides, the stock's now a little over what I estimate to be its intrinsic value, so I'm no longer in any rush to buy COH shares.


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## skc (24 October 2011)

Mr Editor said:


> Thanks for pointing out that inconsistency, though what I meant is that while management has an idea of the expenses of a 1% failure rate of the CI512 product, they haven't even mentioned what exactly is the failure rate now. What do they estimate it to be? Could these failures be merely a precursor of many more? Does management's $130-$150 million provision take these questions into account? These are lingering questions that make me hesitant to buy right now.
> 
> And besides, the stock's now a little over what I estimate to be its intrinsic value, so I'm no longer in any rush to buy COH shares.




The $150m was just direct cost based on the announcement. The two big risks as you rightly pointed out are loss of market share and continued failure of current stock of implanted units.

If COH wasn't priced so dearly by the market in the good times it may have worth a punt. But I just don't feel like paying high PE for something that just showed you the risks inherent in a single product company...


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## McLovin (25 October 2011)

Mr Editor said:


> Thanks for pointing out that inconsistency, though what I meant is that while management has an idea of the expenses of a 1% failure rate of the CI512 product, they haven't even mentioned what exactly is the failure rate now. What do they estimate it to be? Could these failures be merely a precursor of many more? Does management's $130-$150 million provision take these questions into account? These are lingering questions that make me hesitant to buy right now.




It's about $20-40k (depending on geographical location) to replace a CI (you can work the maths out at various failure rates). The current provision relates to recalling shelf stock, not replacing failed implanted devices.


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## Mr Editor (25 October 2011)

McLovin said:


> It's about $20-40k (depending on geographical location) to replace a CI (you can work the maths out at various failure rates). The current provision relates to recalling shelf stock, not replacing failed implanted devices.




OK, apologies for my misunderstanding. My next question is will the cost to replace the failed implants come out of the company's pocket or will it be a responsibility of the recipients of the failed plants?


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## McLovin (25 October 2011)

Mr Editor said:


> OK, apologies for my misunderstanding. My next question is will the cost to replace the failed implants come out of the company's pocket or will it be a responsibility of the recipients of the failed plants?




The implant is under a 10 year warranty, so it will be the company's responsibility (the 20-40k figure is the cost to the company including the cost of surgery to replace the unit) . There is a warranty provision but the amount is not disclosed. See Note 3(g).


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## McCoy Pauley (7 November 2011)

Looks like COH's share price hit a solid brick wall at about $60/share and it's fallen back towards $50/share (including a 2% drop today, so far).  I'm not presently able to post a chart (will try to do so later today), but having a look at a three-month daily chart, COH's price rose to the giant gap that arose in mid-September 2011 and now it's fallen back significantly.

I assume that much of the selling is driven by people who bought in a fair while ago and are scrambling to close their positions at any price.  Volume doesn't seem to be falling with any great certainty at this stage, so there's a bit of consolidation still to occur before all the sellers are shaken out.

The beauty is that if the price continues to fall, it will present another opportunity to pick up some more COH shares at a decent price as I still consider COH to be a solid company with continuing excellent prospects that are not, in the long-term, affected significantly by the recall.


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## robusta (7 November 2011)

McCoy Pauley said:


> Looks like COH's share price hit a solid brick wall at about $60/share and it's fallen back towards $50/share (including a 2% drop today, so far).  I'm not presently able to post a chart (will try to do so later today), but having a look at a three-month daily chart, COH's price rose to the giant gap that arose in mid-September 2011 and now it's fallen back significantly.
> 
> I assume that much of the selling is driven by people who bought in a fair while ago and are scrambling to close their positions at any price.  Volume doesn't seem to be falling with any great certainty at this stage, so there's a bit of consolidation still to occur before all the sellers are shaken out.
> 
> The beauty is that if the price continues to fall, it will present another opportunity to pick up some more COH shares at a decent price as I still consider COH to be a solid company with continuing excellent prospects that are not, in the long-term, affected significantly by the recall.




Funny that you posted this today, I just bought a parcel for my SMSF @ $51.96. Probably too early or too late depending how you look at it but definately a long term keeper IMO.


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## tronic72 (7 November 2011)

The market is a fickle beast.

At the time of the recall, COH had a market cap of $4.11 Billion. Today it has a MC of just over $3 billion. COH is traditionally very conservative with its estimates with a write-back likely on their $130-$150 mil estimate. 

A friend of mine recently had some issues with a supplier of hers and was explaining how they had contacted the customers, reassured them and offered

It's almost laughable that over a billion dollars would be wiped from a company that until a few months ago, was on any savvy investors Christmas list.

All I can say is; thanks Santa


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## tronic72 (7 November 2011)

McCoy Pauley said:


> Looks like COH's share price hit a solid brick wall at about $60/share and it's fallen back towards $50/share (including a 2% drop today, so far).  I'm not presently able to post a chart (will try to do so later today), but having a look at a three-month daily chart, COH's price rose to the giant gap that arose in mid-September 2011 and now it's fallen back significantly.
> 
> I assume that much of the selling is driven by people who bought in a fair while ago and are scrambling to close their positions at any price.......




I suspect there might be quite a few profit takers in the selling camp. I got in and out a few times from the lows and a 30% bounce is almost unheard of in this market...

M2c


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## McCoy Pauley (30 November 2011)

COH's share price up 4.3% today so far against a flat market, on top of a ~1.5% increase on Monday.  No market-sensitive announcements released publicly for quite some time.  Nothing I could find online to suggest the big spike in the share price.  I wonder if the ASX will share my suspicions.

By the way, I did note that one of the founders of what became Cochlear, Dr Mike Horshorn died on the weekend from cancer, and the inventor of the bionic ear implant, Professor Graeme Clark, was awarded the Florey Medal for his work in developing the implant.

http://www.theaustralian.com.au/hig...the-florey-medal/story-e6frgcjx-1226201244590

http://www.theaustralian.com.au/bus...er-mike-hirshorn/story-fn91v9q3-1226201846202


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## robusta (17 December 2011)

Nice broker update on COH

http://finance.ninemsn.com.au/newscolumnists/other/8390367/hearing-cochlears-call


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## McCoy Pauley (20 December 2011)

Cochlear has been given a fair degree of coverage in recent editions of the AFR in relation to its ongoing issues with the AMWU and negotiating new agreements for its manufacturing workers, including an article today.

None of the articles are, IMO, particularly relevant to the ongoing performance of the share price, but it does demonstrate that not everything is rainbows and skittles at the manufacturing plant (for quite some too, apparently).


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## TheAbyss (20 December 2011)

McCoy Pauley said:


> Cochlear has been given a fair degree of coverage in recent editions of the AFR in relation to its ongoing issues with the AMWU and negotiating new agreements for its manufacturing workers, including an article today.
> 
> None of the articles are, IMO, particularly relevant to the ongoing performance of the share price, but it does demonstrate that not everything is rainbows and skittles at the manufacturing plant (for quite some too, apparently).




I am guessing it is the same metal workers union people looking for a pay rise who are responsible for the Brazing issues which caused the recall? Pity staff cant be held accountable for their errors unlike senior management who wear the blame and lose their jobs for staff failings.

Onwards and upwards COH.


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## skc (20 December 2011)

Good news by COH... basically they've found the root problem with the manufacturing process that led to the recall.

Not sure how I missed the news earlier today but in now at $60.35.

Good swing trading opportunity if it closes above $61, leading to at least a partial close of that massive gap back in Sept.


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## tminus (20 December 2011)

Was the news leaked out earlier there was a jump at 1.30 pm with 4x the volume then at 2.20pm there was an article on AFR about it being a water issue.


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## skc (20 December 2011)

tminus said:


> Was the news leaked out earlier there was a jump at 1.30 pm with 4x the volume then at 2.20pm there was an article on AFR about it being a water issue.




The release came out at 14:21:00 on WebIress... 

It wasn't marked market sensitive (a mistake imo) so there was no stoppage in trading. The spike at 1:30pm or so does look like a leak.

Anyhow... easiest trade all year for me.


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## McCoy Pauley (20 December 2011)

Looks to have closed at $64.33/share, a gain of 16.4%.  Very interesting that COH management decided not to mark the announcement as price-sensitive.


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## robusta (20 December 2011)

skc said:


> Anyhow... easiest trade all year for me.




COH to me is a long term hold, they have ~60% market share of a market that is growing ~12.5% PA. 

Compound return to shareholders of 12.5% (I think they will do better) over a decent time period should workout OK.

Good luck with your strategy skc, hope you make a killing on COH


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## McLovin (20 December 2011)

Good to see the fail rate is falling off with the recall, rather than staying flat or continuing to rise. Hopefully, that trend continues and points to the units failing early in their life rather than the fail rate being spread.

Good Christmas this year for me. DMX last week, COH this week.


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## McCoy Pauley (21 December 2011)

Some profit-taking occurring this morning so far.  Down just under 1%, but it was at one point down more than 2%.

Funnily enough, I spotted yesterday what appears to me to be a short-term symmetrical triangle (not a textbook one, though) forming on the chart before the share price popped with the announcement yesterday afternoon.  Refer to the attached chart.

I'm not a technical analyst nor do I invest on technical grounds, but I thought the pattern looked quite striking when I noticed it.


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## robusta (10 January 2012)

Just noticed COH have snuck into the top 10 shorted stocks on the ASX

http://www.thebull.com.au/articles/a/22191-top-10-shorted-stocks.html

Maybe I will get the chance to buy some more in the future.


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## McCoy Pauley (10 January 2012)

That would partly explain why COH shares are underperforming the market so far this year.

In hindsight, the pop on management's announcement to the market late last year was overdone considerably and the share price will continue to retrace.

It will be interesting to see what comments about the product recall management inserts into the first half results which are likely to be released towards the end of February (if past history is a guide).

I read an interesting piece about a private hospital being established in a Sydney suburb in yesterday's AFR.  The piece has nothing to do with COH except for a quote in the article that in order to run a successful hospital, the hospital administrators need to keep the doctors onside, because essentially the doctors decide where their patients go.  

I think this is quite apt for COH and other medical device manufacturers - doctors will effectively decide which implant will be used to improve their patients' hearing.  Thus, the strategy COH has adopted of being ultra-careful with the product recall is designed, in part, to show the doctors and surgeons that they are being very risk averse and that they can continue to trust COH to build and supply quality products.  Therefore, while the short-term reputation of COH might decline, in the long-term, the strategy should pay handsome dividends.


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## McCoy Pauley (13 January 2012)

Looks like COH has the potential to fall through the bottom of the rising channel (see chart attached).

As a holder, would like to see the chart reverse course next week, but IMO, the sellers are in charge at the moment.

First half results should be emerging in about six weeks.  This will give everyone an indication of the bottom line damage done by the recall.


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## notting (13 January 2012)

Hope so, im going to go sick on it.  Started filling up cautiously.already.
I think its just people jumping off defensive into more bullish things. It will run hard and catch up quick no matter what the market does. Lots of grandpa's coming down the line!


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## McCoy Pauley (19 January 2012)

It appears as though COH's share price is bouncing off the bottom of the rising channel in the chart I posted last week.

Still a long way from closing that massive gap that appeared in the chart thanks to the recall, though.


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## McCoy Pauley (7 February 2012)

COH released its first half results this morning and an update on the product recall.

Before the costs of the recall, COH's revenue increased on the comparable period a year ago, but its EBIT fell 10% and NPAT before the recall fell 8%.  COH announced that the recall costs so far were $100 million after tax, causing a net loss for the half of $20.4 million.

COH announced an increased dividend for the first half (previously foreshadowed) to $1.20 per share.  

It advised that the failure rate for its Nucleus CI500 series implant as at 31 January 2012 was 2.4% with newly reported device failures falling every month since 31 October 2011.  COH has not found any additional cause for the failure of the implants since its announcement in December 2011.

COH never provides guidance on future performance, but I suspect that the worst of the costs incurred through the product recall is now behind COH and it shouldn't affect the second half performance as badly as it affected the first half performance.


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## McLovin (7 February 2012)

McCoy Pauley said:


> Before the costs of the recall, COH's revenue increased on the comparable period a year ago, but its EBIT fell 10% and NPAT before the recall fell 8%.  COH announced that the recall costs so far were $100 million after tax, causing a net loss for the half of $20.4 million.




The lower EBIT and NPAT was because the recall constrained supply. It looks as though they are now in a position to resume business as usual.


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## robusta (8 March 2012)

Looking at the price action it seems the short sellers are having fun with COH if the price falls further I might buy some


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## notting (8 March 2012)

Bean chewing on it.
Great company and whith the Reserve bank FINALLY waking up to the fact that *"Gee the au$ is a bit high isn't it?"* May help a bit of downward pressure on au$ and assist things like COH and QBE!


----------



## Trembling Hand (8 March 2012)

robusta said:


> Looking at the price action it seems the short sellers are having fun with COH if the price falls further I might buy some




LOL you mean the short sellers that have sold  0.1 % of issued shares?


----------



## skc (8 March 2012)

Trembling Hand said:


> LOL you mean the short sellers that have sold  0.1 % of issued shares?
> 
> 
> 
> ...




That's the daily shorts. Gross short position on COH is ~10% which puts it in the top 10 for ASX.

http://www.thebull.com.au/articles/a/22191-top-10-shorted-stocks.html

You know value investors are always thankful to the shorters until said investors run out of money to average down... then they curse them...


----------



## Trembling Hand (8 March 2012)

skc said:


> That's the daily shorts. Gross short position on COH is ~10% which puts it in the top 10 for ASX.
> 
> http://www.thebull.com.au/articles/a/22191-top-10-shorted-stocks.html




Where does that data come from?


----------



## poverty (8 March 2012)

notting said:


> Bean chewing on it.
> Great company and whith the Reserve bank FINALLY waking up to the fact that *"Gee the au$ is a bit high isn't it?"* May help a bit of downward pressure on au$ and assist things like COH and QBE!




You're talking like the RBA just cut rates, but they didn't?


----------



## skc (8 March 2012)

Trembling Hand said:


> Where does that data come from?




http://asic.gov.au/asic/asic.nsf/byheadline/Short+position+reports+table?openDocument


----------



## Trembling Hand (8 March 2012)

skc said:


> http://asic.gov.au/asic/asic.nsf/byheadline/Short+position+reports+table?openDocument




Well there ya go. Ta.


----------



## blue0810 (8 March 2012)

skc said:


> http://asic.gov.au/asic/asic.nsf/byheadline/Short+position+reports+table?openDocument





skc >Thanks for  the link ,  i was looking  the daily shorts  instead Gross short position as your post.


----------



## robusta (8 March 2012)

skc said:


> You know value investors are always thankful to the shorters until said investors run out of money to average down... then they curse them...




True it is difficult to pick the bottom price. In this case if i picked up some more I would be averaging up if that is such a thing as I picked up my first parcel @ $45.85 a few months ago (sometimes you get lucky)

Anyhow it is probably all academic as I would like to buy under $55.00


----------



## notting (11 April 2012)

Just fell through 10 day support level with a bit of attitude.
It's a defensive, bit odd.


----------



## Knobby22 (11 April 2012)

notting said:


> Just fell through 10 day support level with a bit of attitude.
> It's a defensive, bit odd.




Maybe investors are thinking the $A is going back up. Also it rose pretty quick, time for a correction. Would lover to buy some if they fell enough.


----------



## McCoy Pauley (5 July 2012)

COH's share price seems to be hitting somewhat of a resistance level at about $67/share.  The upward trend has died off, but the pull-backs are growing shallower on the chart.  We might be poised to see a break-out, particularly around the date the annual results are released in August.


----------



## skc (5 July 2012)

McCoy Pauley said:


> COH's share price seems to be hitting somewhat of a resistance level at about $67/share.  The upward trend has died off, but the pull-backs are growing shallower on the chart.  We might be poised to see a break-out, particularly around the date the annual results are released in August.




Plenty of broker downgrade to sell and all that which is surprising for COH, and probably means a breakout is imminent....


----------



## herzy (5 July 2012)

skc said:


> Plenty of broker downgrade to sell and all that which is surprising for COH, and probably means a breakout is imminent....




please forgive my ignorance with trading, but why do broker 'sell' recommendations indicate a breakout?


----------



## pixel (6 July 2012)

herzy said:


> please forgive my ignorance with trading, but why do broker 'sell' recommendations indicate a breakout?




Because many, when they want to buy in a big way, will recommend to the unwashed masses: "Sell! Sell!"

The charts certainly look set for further upside.
Daily:





and Weekly:


----------



## skc (6 July 2012)

herzy said:


> please forgive my ignorance with trading, but why do broker 'sell' recommendations indicate a breakout?




It was more tongue-in-cheek than anything else.

If you ever watch share price behaviour with broker recommendations, you will find that there are indeed volume moving in the direction of the recommendation at least for the initial hours / days. The fact that COH's chart is still positioning for a breakout means that those selling (if any) has proved insufficient and so the underlying buying demand is strong. 

We will find out whether this theory makes any sense or not soon.


----------



## herzy (6 July 2012)

Thanks for that! SKC, do you also agree it's looking bullish for COH?


----------



## skc (6 July 2012)

herzy said:


> Thanks for that! SKC, do you also agree it's looking bullish for COH?




Yes I do but I reserve the right to change my opinion by the time I finish typing this post...

Seriously - it was looking bullish with the break of $63 but it has lingered btw $63-$66 for a while. So it may not fly up desite what chart pattern textbooks might suggest.


----------



## pixel (6 July 2012)

herzy said:


> Thanks for that! SKC, do you also agree it's looking bullish for COH?




So far, today's volume (most of it *selling*) is between negligible and non-existing. Still, the price can well be pushed downwards towards $64, yet still maintain the ascending triangle pattern.
It's only when volume starts to increase significantly beyond the (blue) average and price breaks the rising support, that I'll get worried.


----------



## robusta (6 July 2012)

pixel said:


> So far, today's volume (most of it *selling*) is between negligible and non-existing. Still, the price can well be pushed downwards towards $64, yet still maintain the ascending triangle pattern.
> It's only when volume starts to increase significantly beyond the (blue) average and price breaks the rising support, that I'll get worried.
> 
> View attachment 47777




Are you shorting COH Pixel? If you are I wish you the best of luck, if the price falls to around $55 I will buy more without hesitation, I think earnings and dividends will rise for the foreseeable future.


----------



## skc (6 July 2012)

Here's one more Sell rating (which is actually rare amongst brokers).



> - COCHLEAR LIMITED
> 
> Deutsche Bank rates as Sell (5) - In Deutsche's view the failure rate of Cochlear devices is trending down, which it notes is consistent with comments from Cochlear management.
> 
> With no changes to forecasts on the news Deutsche retains a Sell rating on Cochlear on valuation grounds.




http://finance.ninemsn.com.au/newsc...063/fn-arena-broker-call-headlines-6-jul-2012


----------



## robusta (6 July 2012)

skc said:


> Here's one more Sell rating (which is actually rare amongst brokers).
> 
> 
> 
> http://finance.ninemsn.com.au/newsc...063/fn-arena-broker-call-headlines-6-jul-2012




Maybe my opportunity will come.


----------



## skc (6 July 2012)

robusta said:


> Maybe my opportunity will come.




This was an updated broker report which retained the same rating as before. I found that change in rating (e.g. from hold to sell) causes more short term volume movement (for obvious reasons).


----------



## pixel (6 July 2012)

robusta said:


> Are you shorting COH Pixel? If you are I wish you the best of luck, if the price falls to around $55 I will buy more without hesitation, I think earnings and dividends will rise for the foreseeable future.



Hey robusta;
What makes you think I'll short? I thought I'd made it quite clear I reckon COH is on the up. But before I commit, I want to know I got the direction right. Therefore, if support comes with volume and looks like breaking to the upside, I'll buy. If it breaks below $64, the deal is off. But I won't trade against the trend.


----------



## robusta (6 July 2012)

Sorry I misread you comment that if it breaks through resistance you would get worried, I did not realise you were looking for a uptrend.


----------



## McCoy Pauley (10 July 2012)

According to a Goldman Sachs' client note, 51 adverse reports associated with the Nucleus N5 implant were filed with the US FDA in June, down significantly on the ~100 adverse reports filed in recent months.  Goldman Sachs estimates that there were 91 adverse events in May 2012.

Goldman Sachs concludes that if the failure rate is kept at or below 100 implants/month, then the recall would only have indirect relevance to COH's performance.

Nonetheless, Goldman Sachs retains a neutral outlook on COH with a $66.00/share 12-month price target on valuation grounds.


----------



## pwnitat0r (19 July 2012)

The recall was a great buying opportunity. Cochlear have shown excellent CSR (corporate social responsibility) and companies that do that usually recover their share price long term.

I think COH was way too expensive before the recall at $80/share, but if you managed to pick some up at $45-50, you're going to be laughing for the next 10-20 years.

Absolutely stellar company in all aspects - from the products they produce which are life changing, to shareholder returns. There is no 2 ways about this. Any broker with a sell recommendation is an absolute twat and should be blacklisted. Every recommendation should have been BUY, BUY, BUY, BUY, BUY!!! The $45-50 is going to be one of the great steals of this decade. I bought in my super and I am very comfortable holding COH long term unless technology dramatically changes and something better comes along that allows the regrowth of hairs in the inner ear which have been damaged to cause the hearing loss.

I have a cochlear implant personally, the recall happened just before my surgery last year. My situation being less than ideal for an implant candidate, but the success I've had and the way it's been able to improve and enrich my life is absolutely incredible.

The competitive advantage they have is tremendous. I have no idea what Med-El and AB spend on R&D, but I'm sure Cochlear spend a lot more.

I think COH is Buffet's dream company he talks about in terms of competitive advantage and ROE, but unfortunately it's too small for him and he'd take his 19.9% holding without so much as blinking.

I can confidently say there is a huge level of unawareness/ignorance when it comes to cochlear implants and there is a HUGE unmet demand. CIs are gaining more and more momentum, especially with young or newborn babies who are deaf, as that is the best time to get them. The problem is more lack of funding or money than anything right now. But, I think as the public becomes more aware of the impact they can have on lives, you'll see more people forking out the ~$30k or so out of their own pockets if they can't get the funding or insurance to cover it. I would have never have paid the $30k before I got mine, but after having it for a little over 6 months, I'd fork that money out in a heart beat now knowing what it can do for me.


----------



## robusta (25 July 2012)

This could be interesting for Cochlear

http://www.thedeal.com/content/restructuring/otologics-looks-to-sell-assets.php

Wonder what those patents are worth?


----------



## clinta44 (30 July 2012)

for those who missed it - there was a feel good article played last night on the program Sunday night. It was great to watch videos of people hearing for the first time! Makes you proud to be a shareholder!

http://au.news.yahoo.com/sunday-night/features/article/-/14375426/first-sounds/


----------



## McCoy Pauley (30 July 2012)

pwnitat0r said:


> The recall was a great buying opportunity. Cochlear have shown excellent CSR (corporate social responsibility) and companies that do that usually recover their share price long term.
> 
> I think COH was way too expensive before the recall at $80/share, but if you managed to pick some up at $45-50, you're going to be laughing for the next 10-20 years.
> 
> ...




I agree with you almost entirely, but this wouldn't be a company that would interest Buffett, for a few reasons.  First, he wouldn't understand the technology (not within the sphere of his competence).  He claims not to have understood how Microsoft made money, so he never invested in Microsoft, even though he's besties with Bill Gates.

Secondly, Buffett wouldn't like to see the amount of money spent annually on R & D by Cochlear.  Given that patents have finite lives and protect only what is claimed in the patent, Cochlear (and every other medical technology company) must spend a considerable fraction of their revenue on developing new technology.  Buffett would likely consider that the competitive advantage enjoyed by Cochlear is relatively transitory and that Cochlear must continue to spend to maintain that advantage.


----------



## McCoy Pauley (30 July 2012)

clinta44 said:


> for those who missed it - there was a feel good article played last night on the program Sunday night. It was great to watch videos of people hearing for the first time! Makes you proud to be a shareholder!
> 
> http://au.news.yahoo.com/sunday-night/features/article/-/14375426/first-sounds/




I saw the promos Seven was running for that last night, and they kept calling it a "new breakthrough" or something similar.  I said to my wife at the time that I was positive it was a Cochlear implant which had been around for years.


----------



## Vader (30 July 2012)

McCoy Pauley said:


> I saw the promos Seven was running for that last night, and they kept calling it a "new breakthrough" or something similar.  I said to my wife at the time that I was positive it was a Cochlear implant which had been around for years.




While Cochlear had the majority focus of the story - it wasn't just about Cochlear. The 'new breakthrough' related to a product from a US company (I didn't pick up their name, but the device is called 'Esteem'), that attacks the problem from a different direction and can help people that can't benefit from a Cochlear implant. 

Info on the story (including video) here:
http://au.news.yahoo.com/sunday-night/features/article/-/14375426/first-sounds/


----------



## McCoy Pauley (6 August 2012)

Big jump today ahead of the full year results being announced tomorrow morning.


----------



## pixel (7 August 2012)

McCoy Pauley said:


> Big jump today ahead of the full year results being announced tomorrow morning.




That may be - but it's still only got to the resistance level of the wedge.
It's got to break with volume - shall watch closely when the results are out.

daily chart:




and weekly chart:


----------



## McCoy Pauley (7 August 2012)

Agreed, pixel.  I don't chart, but from my observations, COH's share price has had a couple of goes at breaking through $67/share without success.

Result announced just on the market open. Revenue of $778,996,000 (down slightly on 2010/2011), NPAT before product recall costs of $158,139,000 (down from $180,114,000) and NPAT after product recall costs of $56,803,000.  Final dividend of 125c/share declared, partially franked to 35%.

Simultaneously, COH released a copy of its letter regarding an update on the implant recall, along the lines that as at 31 July 2012, the overall proportion of Nucleus CI500 series devices reported as failed was 4.2% of all registered Nucleus CI500 devices globally.  Newly reported failures continue to fall - failures in July 2012 were approximately 1/3rd of failures in October 2011.  The FDA and its European equivalent have notified COH that all necessary actions associated with the return of unimplanted devices have been completed.


----------



## McCoy Pauley (7 August 2012)

Big fall this morning following the release of the announcement - down almost 7.5% to $61.49/share.


----------



## pixel (7 August 2012)

McCoy Pauley said:


> Big fall this morning following the release of the announcement - down almost 7.5% to $61.49/share.




sell-off was fast and furious, but may have been overdone. 
Remember what they say about Amateurs opening the session, Professionals closing the day?
Interesting too, where it found support...


----------



## robusta (7 August 2012)

So glad not to be playing the short term game betting if a company beats or misses analyst expectations for the current reporting period. Long term the growth story should continue meanwhile sit back and enjoy growing; cash flow, EPS and dividends.


----------



## McCoy Pauley (20 August 2012)

All the share price declines since the release of the full year report have been recovered and then some, with the share price breaking through that $67/share barrier today (up more than 3% so far today).

IMO, it would be bullish for COH to close above $67/share today, although it is due to go ex-dividend on Thursday (IIRC).

I hold, so DYOR.


----------



## McCoy Pauley (21 August 2012)

Up through the $69/share barrier today. Perplexed as to why the share price has taken off like a rocket so far this week.  I'm enjoying the ride, though, so DYOR.


----------



## robusta (21 August 2012)

McCoy Pauley said:


> Up through the $69/share barrier today. Perplexed as to why the share price has taken off like a rocket so far this week.  I'm enjoying the ride, though, so DYOR.




Mystery to me as well, no new information out there as far as I know. Change of sentiment? Broker upgrade? Trend followers onboard? Broken through some technical resistance?


I have no idea. All I know is the price is not high enough to make me sell nor low enough to add to my holding.


----------



## McCoy Pauley (22 August 2012)

Share price dropping back today with a fall outpacing the fall on the broader market.  Still a mystery as to why the share price exploded in the last few days.


----------



## 3134316 (15 November 2012)

Any insights into these last weeks folks?
I know bilateral implants are much more common now and older australians are also taking implants...

Very curious to see this uptrend continuing to the 75 border and wondering if anyone knows if there are any possible explanations
Any thoughts regarding the following possibilities?
a) new processors coming soon, new hardware / software changes
b) changes in ausgovt subsidies via medicare (i.e. Bilateral implant funding vs. one only?)
c) any bad news for competitors recently? any good news?
d) any new research out regarding cochlear implants?

Thanks for your time,
T
{disclosure, have shares in it and have a family member with 2 implants}


----------



## Cyph (23 November 2012)

3134316 said:


> b) changes in ausgovt subsidies via medicare (i.e. Bilateral implant funding vs. one only?)
> 
> {disclosure, have shares in it and have a family member with 2 implants}




How did your family members get theirs? I'm not 100% certain, but I understand the Government only provides limited funding for cochlear implants. Most of the implants done here are covered by private health insurance and the SCIC (http://www.scic.org.au/). I got my implant through the SCIC.

Australia is only a small part of Cochlear's market, so to only focus here would be a little short sighted perhaps?


----------



## robusta (11 January 2013)

Looks like the market is really taking notice of these broker reports.

http://www.dailypolitical.com/finan...reiterates-underperform-on-cochlear-coh-2.htm

I will continue to hold and see how much the put the dividend up.


----------



## RottenValue (11 January 2013)

Broker = Salesman

Broker makes money by people buying or selling

Cochlear is too expensive to put a Buy on, therefore lets tell the punters to sell


----------



## catfish (12 January 2013)

All the 'quality' value picks in the market are looking very expensive. Coh, rea, nvt etc
Most are hitting new highs every week

Coh at 27 times earnings seems silly, where would it be if the recall did happen?


----------



## robusta (12 January 2013)

catfish said:


> All the 'quality' value picks in the market are looking very expensive. Coh, rea, nvt etc
> Most are hitting new highs every week
> 
> Coh at 27 times earnings seems silly, where would it be if the recall did happen?




The recall did happen, it presented a nice buying opportunity.

I agree COH and NVT are probably too expensive to buy at the moment but they are very high quality businesses with a long history and the chance of future growth.


----------



## catfish (12 January 2013)

robusta said:


> The recall did happen, it presented a nice buying opportunity.
> 
> I agree COH and NVT are probably too expensive to buy at the moment but they are very high quality businesses with a long history and the chance of future growth.




I meant didn't ..

I got some in the early 50s. Undecided on selling at the moment. Are you holding?


----------



## robusta (12 January 2013)

catfish said:


> I meant didn't ..
> 
> I got some in the early 50s. Undecided on selling at the moment. Are you holding?




Yes I am holding, there are not that many businesses listed on the ASX that are this quality IMO. I intend to hold.


----------



## odds-on (15 January 2013)

robusta said:


> The recall did happen, it presented a nice buying opportunity.
> 
> I agree COH and NVT are probably too expensive to buy at the moment but they are very high quality businesses with a long history and the chance of future growth.




COH will fail, just when..

How many years has COH been admired by investors and media?
How many years has COH been trading at a premium?

Once it gets past ten years the odds are well in favour of a shorting strategy..

Not being negative just been reading about creative destruction.


----------



## McCoy Pauley (17 January 2013)

odds-on said:


> COH will fail, just when..
> 
> How many years has COH been admired by investors and media?
> How many years has COH been trading at a premium?
> ...




COH has been a standout performer almost as soon as it was listed, back in the late 1990s.  I've held shares in COH I purchased since it floated, and wished I had bought more in the early 2000s (but I was too busy getting drunk and chasing skirts at uni to worry about the stock market).  I did buy some more last year after the recall.

All through its listed history, COH has been admired by investors and pretty much been trading at a premium.  But that's because it's had excellent management throughout, maintained high barriers to entry to new competitors and had a decent chunk of the worldwide (and growing) market.

There is always a risk with technology stocks that its technology could be superseded and the R&D it performs doesn't keep it ahead of the pack, but its track record is pretty much without peer in Australian corporate history.

COH's share price peaked at an all-time high of roughly $85/share a couple of months before they announced the voluntary recall and it's roughly $81/share now.

Looking forward to the half-year report next month.


----------



## odds-on (20 January 2013)

McCoy Pauley said:


> COH has been a standout performer almost as soon as it was listed, back in the late 1990s.  I've held shares in COH I purchased since it floated, and wished I had bought more in the early 2000s (but I was too busy getting drunk and chasing skirts at uni to worry about the stock market).  I did buy some more last year after the recall.
> 
> All through its listed history, COH has been admired by investors and pretty much been trading at a premium.  But that's because it's had excellent management throughout, maintained high barriers to entry to new competitors and had a decent chunk of the worldwide (and growing) market.
> 
> ...




Thanks Pauley.

Creative destruction is fascinating to read about. The book I have been reading seems to suggest that from studies of the US market there is a shift in survival probabilities after ten years of being admired by all and trading at a premium. Perhaps COH will be another Coca Cola and be extraordinary for decades.

What strategy can be best applied to stocks like COH? Buy dips and take small profits....

Cheers

Oddson


----------



## robusta (20 January 2013)

If you think Cochlear will be extraordinary for decades the best strategy would be to buy the dips and hold for decades.


----------



## robusta (5 February 2013)

Results out today, I thought they were OK. Perhaps the market was expecting better. They did not do as well this half with their FX contracts.


----------



## McCoy Pauley (5 February 2013)

Like you, robusta, I thought the results looked okay at first blush, but Cochlear reduced its franking rate to 40%, down from 60%, and the rise in the interim dividend was only 5c/share. Share price was smashed down almost 10% today. Cochlear doesn't give forward looking estimates, so the market has nothing concrete to model the second half of the year against.

I guess that the market is used to miracles from Cochlear, and the fact that revenue and NPAT was pretty much flat for the first half of the year simply wasn't good enough.

I'm still sitting on some good unrealized capital gains, so I'm not really in a hurry to sell at this stage, and I expect the share price to recover in the next few months, when people realize that the company is still a well-managed company, notwithstanding the fallout from the voluntary recall.


----------



## McCoy Pauley (5 February 2013)

According to Bloomberg, analysts have written in notes to clients that the flat result indicates a loss of market share in developed countries.


----------



## notting (5 February 2013)

14% decline on sales margin didn't help.
Nearly went short at 76 but I love it too much so probably wouldn't have managed it very well and decided to wait to buy.


----------



## robusta (5 February 2013)

So NPAT at 77.7 mil missed expectations by a couple of million.

Here is the view from the lovely Juliette Saly from Comsec.

http://www.brrmedia.com/event/109538/juliette-saly-market-analyst-commsec

The fx gains in the previous reporting period were 36.3 million, now 23.5 million. They are coming back from the recall and competing with the high Aussie $, in my opinion not a bad result considering those headwinds.

The recent rally in the share price followed by today's fall all seem a bit short term to me, I will look forward to seeing the full year results in six months time.


----------



## notting (5 February 2013)

robusta said:


> The recent rally in the share price followed by today's fall all seem a bit short term to me.




Scary part is that that's what people were saying after the recall announcement.

Volume was highest for 12months, which adds to the plunge picture.
I'd like to see that and make another disgracefully irresponsible buy.


----------



## robusta (5 February 2013)

notting said:


> Scary part is that that's what people were saying after the recall announcement.
> 
> Volume was highest for 12months, which adds to the plunge picture.
> I'd like to see that and make another disgracefully irresponsible buy.




True if the price fell below $60.00 maybe towards $55.00 I would have to get all exited again.


----------



## McCoy Pauley (6 February 2013)

robusta said:


> So NPAT at 77.7 mil missed expectations by a couple of million.
> 
> Here is the view from the lovely Juliette Saly from Comsec.
> 
> ...




Interesting.  I was listening to Market Day podcast from yesterday on the way into work this morning, and Market Day suggested that COH missed estimates by up to $10 million.

I note that COH is close to dropping through $70/share this morning.


----------



## McLovin (6 February 2013)

It looks as though COH lost some market share to AB because of the recall, despite saying the fallout had been contained. Sonova reported a big jump in their CI for the last half (Swiss reporting April to September 2012). I'd say that COH was pretty much flat and the spike in Apac sales can be atributed to a single Chinese government contract win back in May last year. In hindsight, at >$80 there was little hope of meeting expectations. The full year result will be telling. If sales are still flat then (in LC), there might be a problem.


----------



## RandR (6 February 2013)

McLovin said:


> It looks as though COH lost some market share to AB because of the recall, despite saying the fallout had been contained. Sonova reported a big jump in their CI for the last half (Swiss reporting April to September 2012). I'd say that COH was pretty much flat and the spike in Apac sales can be atributed to a single Chinese government contract win back in May last year. In hindsight, at >$80 there was little hope of meeting expectations. The full year result will be telling. If sales are still flat then (in LC), there might be a problem.




Even now after the drop COH is still priced for a LOT of growth. compare it to the multiples other (very solid) business are trading at with real more 'certain' growth makes it hard to justify the COH investment case just now. If growth is stalling there will be a big problem with the company being rerated effectively by the market at much lower multiples of earnings.


----------



## coolcup (6 February 2013)

I bought some today... value trap?? perhaps...

Companies like this are generally bottom left to top right type charts. When they rarely crash like this, it almost always ends up being a great time to buy. They are still market leaders in their field with 60% market share, their first ever product recall which was voluntary (only 1% failure rate in devices recalled) and their competitors have a much higher incidence of device failure. I felt willing enough to back the management team to turn the ship around following the recent glitch. Any thoughts??


----------



## Knobby22 (6 February 2013)

They are a one product company and so can lose profits quite quickly. For the first time they have an organised competitor and they have to re-release their failed unit. Another concern is that they went up too quick. They are a bit of a market darling and though it is better buying today, I would want a lower price as the risks are higher.


----------



## robusta (6 February 2013)

coolcup said:


> I bought some today... value trap?? perhaps...
> 
> Companies like this are generally bottom left to top right type charts. When they rarely crash like this, it almost always ends up being a great time to buy. They are still market leaders in their field with 60% market share, their first ever product recall which was voluntary (only 1% failure rate in devices recalled) and their competitors have a much higher incidence of device failure. I felt willing enough to back the management team to turn the ship around following the recent glitch. Any thoughts??




You could well be right I get the feeling I will look back in a few years and wonder why I didn't top up this week. Another 10 to 15% drop from here will be required before I would buy however. 

If Cochlear can get it right compared to their competitors the growth should be satisfactory from here.


----------



## tinhat (6 February 2013)

I kicked myself for not buying in late 2011.

I would just point out that on a monthly chart, if the last top ($82.87) was lower than the $85 top in May 2011. I personally would be interested in COH if it down around $60.


----------



## notting (6 February 2013)

tinhat said:


> I would just point out that on a monthly chart, if the last top ($82.87) was lower than the $85 top in May 2011. I personally would be interested in COH if it down around $60.




Yeah, mid 50s for me. 
Probably a bit conservative but this will go down as a second strike and potential perception changer for long term faithfuls which may also cause a longer flat consolidation unlike the big V it just completed.
I heard of one downgrade today to $59 and was told that there have been whispers leading up to this to short it!
I'm kicking myself now that I didn't take the $76 short yesterday.  
If I believe what I'm writing I should be in there at any level above $70. 
So I tell myself to put up or shut up!


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## McLovin (7 February 2013)

RandR said:


> Even now after the drop COH is still priced for a LOT of growth. compare it to the multiples other (very solid) business are trading at with real more 'certain' growth makes it hard to justify the COH investment case just now. If growth is stalling there will be a big problem with the company being rerated effectively by the market at much lower multiples of earnings.




Absolutely correct. I sold yesterday. The market is growing at 10-15%/year but COH's sp implies that it will grow faster than the market. Very hard to do when you already have 70% of the market. Not to mention that AB is finally getting its act together.

Of course I knew this before the results announcement but I was greedy.


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## robusta (7 February 2013)

Funny thing, perception Cochlear has had 10 years of fantastic growth, now they are being hammered by the market for the most recent half revenue only growing 9% while the margins are flat at best.

Cochlear have been hit by the perfect storm recently, being hit with the recall followed by Advanced Bionics getting their act together. It will be interesting to see their reaction.

Interesting times indeed maybe Advanced Bionics have the technology lead at the moment, I will look forward to seeing what the Cochlear R&D machine can come up with. Cochlear have been undisputed world champs for a awhile, is Advanced Bionics a contender or a pretender?


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## robusta (7 February 2013)

Looks like the brokers are still trying to develop a consensus.

http://www.fnarena.com/index2.cfm?type=dsp_newsitem&n=AD47DFF8-0BC7-27FD-E15A7358CF4FE328


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## McCoy Pauley (11 February 2013)

Anyone catch Kohler's interview with Dr Chris Roberts, the Cochlear CEO, on Inside Business yesterday? I was out so I've only seen a news report this morning, but it suggests that Cochlear is looking to grow its footprint in China and other emerging markets?


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## clinta44 (11 February 2013)

You can catch it here. Kohler is a douche, but He seems to get a few good interviewee's that are worth listening too! 

http://www.abc.net.au/insidebusiness/content/2011/s3687050.htm


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## Gringotts Bank (11 February 2013)

McCoy Pauley said:


> Anyone catch Kohler's interview with Dr Chris Roberts, the Cochlear CEO, on Inside Business yesterday? I was out so I've only seen a news report this morning, but it suggests that Cochlear is looking to grow its footprint in China and other emerging markets?




Yeh I saw it.  I'd never seen Roberts before but he came across as a bit old fashioned, or a bit off the pace.

Still a great co. and I'd like to trade it if it gets to [edit]...  yes a good opportunity for a bounce.


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## McLovin (11 February 2013)

McCoy Pauley said:
			
		

> Anyone catch Kohler's interview with Dr Chris Roberts, the Cochlear CEO, on Inside Business yesterday? I was out so I've only seen a news report this morning, but it suggests that Cochlear is looking to grow its footprint in China and other emerging markets?




There wasn't too much new in that interview. It is still a great company but not at any price.


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## clinta44 (11 February 2013)

Gringotts Bank said:


> I'd never seen Roberts before but he came across as a bit old fashioned, or a bit off the pace.




My thoughts on the man. I think he just happened to land the CEO job at a great company, and he's not a great CEO. He presided over the company during the recall debacle and still collects massive bonuses! 

I still cant fathom why he is keeping Manufacturing in Australia, It's a massive disadvantage! Its a massive cost disadvantage, but even worse because a lot of the products are manufactured here a lot of countries won't register the product until it has been registered here first, and Australian approvals are slow as a wet week!


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## Nawill (20 March 2013)

Can anyone explain why COH dived in early Feb?


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## skc (20 March 2013)

Nawill said:


> Can anyone explain why COH dived in early Feb?




They reported profits that were below market expectation.

If you simply scroll back a few posts you will see some commentary from various posters around that time.


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## robusta (30 March 2013)

On top of Advanced Bionics getting their act together it looks like the Chinese are now making implants for half the price.

http://www.businessweek.com/articles/2013-03-28/a-chinese-hearing-implant-takes-aim-at-cochlear

When you are the market leader in a growing market with nice fat margins other businesses will want a piece of that action.

Big surprise it looks like the analysts still can't reach a consensus.

http://zolmax.com/cochlear-given-outperform-rating-at-sanford-c-bernstein-coh/52442/


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## robusta (2 April 2013)

robusta said:


> On top of Advanced Bionics getting their act together it looks like the Chinese are now making implants for half the price.
> 
> http://www.businessweek.com/articles/2013-03-28/a-chinese-hearing-implant-takes-aim-at-cochlear
> 
> ...




Share price down almost 3% today, the future should be interesting for Cochlear.


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## chops_a_must (2 April 2013)

robusta said:


> Share price down almost 3% today, the future should be interesting for Cochlear.




It's heading to 45 IMO. Looks to be in a corrective wave c after completing five waves and a wave a and b.

CSL also looks like it could be entering a prolonged down turn after completing a long term wave 5.


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## robusta (2 April 2013)

chops_a_must said:


> It's heading to 45 IMO. Looks to be in a corrective wave c after completing five waves and a wave a and b.
> 
> CSL also looks like it could be entering a prolonged down turn after completing a long term wave 5.




Thank you chops_a_must, having no understanding of technical analysis myself it is good to get your view. Here is another view from The Motley Fool's Mike King.

http://www.fool.com.au/2013/04/02/is-now-the-time-to-buy-cochlear/

As I have posted in this thread I would become interested again if the sp heads towards $55.00 but until then it is a hold and watch from me.


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## McLovin (2 April 2013)

I don't see the COH share price weakness as being the result of a few cheap knock-offs out of Asia. The implied growth in the SP doesn't match the reality of the business and that's why the price is coming off.


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## robusta (2 April 2013)

McLovin said:


> I don't see the COH share price weakness as being the result of a few cheap knock-offs out of Asia. The implied growth in the SP doesn't match the reality of the business and that's why the price is coming off.




You could be right McLovin probably the hardest thing to predict is future growth, how much it will compound and for how long. Given Cochlear's history of growth they deserve a place in my portfolio. Maybe just maybe the growth will continue.


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## McLovin (2 April 2013)

robusta said:


> You could be right McLovin probably the hardest thing to predict is future growth, how much it will compound and for how long. Given Cochlear's history of growth they deserve a place in my portfolio. Maybe just maybe the growth will continue.




AB claims 10-15% industry growth. Given COH's size, it's hard to see them growing above industry. So then the question is are they worth 23x earnings?


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## McCoy Pauley (2 April 2013)

My opinion, and it is only my opinion, is that investors/speculators are frustrated on the company's silence over the reintroduction of the recalled implant model or its replacement.  COH has never given guidance and therefore analysts tend to grasp at straws when trying to predict COH's future.

The introduction of cut-price implants in markets yet untapped by COH is of some concern, but if the manufacturers cut corners on the development of the implants which leads to an eventual recall, COH is in prime position to take up the market share in those countries.

Further, given the size of the populations of China and India, COH may not necessarily need such a high proportion of the market in order to make a satisfactory rate of return on its investments in those countries.


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## robusta (2 April 2013)

McLovin said:


> AB claims 10-15% industry growth. Given COH's size, it's hard to see them growing above industry. So then the question is are they worth 23x earnings?




Just looking at the dividends if they can increase by 10% a year for the next ten years they will be paying around $6.35 annually if they can stretch it to 15% you are looking at around $9.50. Ten years is a long time but the chance for this sort of growth is worth holding a business of this quality in my opinion.


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## Klogg (2 April 2013)

robusta said:


> Just looking at the dividends if they can increase by 10% a year for the next ten years they will be paying around $6.35 annually if they can stretch it to 15% you are looking at around $9.50. Ten years is a long time but the chance for this sort of growth is worth holding a business of this quality in my opinion.




Growing profits by 10% for ten years in a row is a huge ask....

And if you assume the same 10% profit growth (from last years' earnings of $2.77/share and current price of $66) you're looking at:


EarningsP/EYear2.7723.8303.0521.6613.3519.6923.6917.9034.0616.2744.4614.795

I know it's an overly simplistic view, but it hardly seems like you're getting value for money at the current share price. Assuming things go perfectly (~10% growth) you've still got a stock trading at almost 20*P/E two years on! (on today's SP)

And as for the 10% growth, I share McLovin's views on size and growth rates...


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## McLovin (2 April 2013)

robusta said:


> Just looking at the dividends if they can increase by 10% a year for the next ten years they will be paying around $6.35 annually if they can stretch it to 15% you are looking at around $9.50. Ten years is a long time but the chance for this sort of growth is worth holding a business of this quality in my opinion.





That might turn out to be the case but it assumes that the market that has existed for the last 10 years continues for the next 10. With increased competition, even if they can maintain 10% growth at the top line it may not translate to 10% growth at the bottom line, and is unlikely to flow through to 10% dividend growth. And even if they can achieve that, what's the value of a $6.35 dividend in 2023 in today's money? If dividends are your strategy then just buy TLS today which is pretty close grossed up yield wise to what COH will be in 10 years time. A bird in the hand etc.


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## robusta (2 April 2013)

Klogg said:


> Growing profits by 10% for ten years in a row is a huge ask....
> 
> And if you assume the same 10% profit growth (from last years' earnings of $2.77/share and current price of $66) you're looking at:
> 
> ...




10% growth per year is a big ask I agree , I also agree the price at the moment is a bit rich. Cochlear on average over the last ten years has only grown EPS by around 10.7% and dividends by 13.7% but this is compounded annually so EPS has gone from $1.09 to $2.77 and dividends have gone from $0.77 to $2.45

If we compound $2.77 out for ten years we get a EPS of  around $7.18

The EPS in 2011 was $3.08 with the recent dip due to the recall but messing with the starting number is just as dangerous as anchoring on the 10% compounding rate.

A logical solution would probably be to work out a price you are prepared to pay where a lower C.A.G.R say around 6-7 % would still give you a decent return. There are not that many ASX listed businesses with a chance of sustained above GDP growth over a long period of time. Cochlear may be one of them.


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## robusta (2 April 2013)

McLovin said:


> That might turn out to be the case but it assumes that the market that has existed for the last 10 years continues for the next 10. With increased competition, even if they can maintain 10% growth at the top line it may not translate to 10% growth at the bottom line, and is unlikely to flow through to 10% dividend growth. And even if they can achieve that, what's the value of a $6.35 dividend in 2023 in today's money? If dividends are your strategy then just buy TLS today which is pretty close grossed up yield wise to what COH will be in 10 years time. A bird in the hand etc.




It is a risky strategy paying high multiples of earnings for future growth. You are right plenty can go wrong. On the few occasions it works out the compounding can work miracles for your returns. Paying a bit over $45.00 just over a year ago I am happy to hold and watch Cochlear for a while yet to see if they can achieve some decent growth. If the growth continues who knows what multiples people would be prepared to pay of those future earnings?


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## chops_a_must (12 April 2013)

robusta said:


> Thank you chops_a_must, having no understanding of technical analysis myself it is good to get your view. Here is another view from The Motley Fool's Mike King.
> 
> http://www.fool.com.au/2013/04/02/is-now-the-time-to-buy-cochlear/
> 
> As I have posted in this thread I would become interested again if the sp heads towards $55.00 but until then it is a hold and watch from me.




It really is in the sweet spot for a short.

It's got a few months before going ex-dividend, sentiment is bad, trend is down, high P/E.

And so I'll be looking to trade and reverse the impending short covering rally because of it.


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## Knobby22 (12 April 2013)

I would like to own this company but would need to see an SP near $50. This would get the dividend near 5% yield (though not fully franked) which would help the decision a lot.


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## robusta (18 April 2013)

chops_a_must said:


> It's heading to 45 IMO. Looks to be in a corrective wave c after completing five waves and a wave a and b.
> 
> CSL also looks like it could be entering a prolonged down turn after completing a long term wave 5.




Well the share price is heading in the right direction.

This in the news yesterday from Advanced Bionics recall a few years ago.

http://www.businessweek.com/news/20...-dot-25-million-cochlear-verdict-zurich-mover

Will Cochlear have similar legal cases bought against them in the future?


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## clinta44 (19 April 2013)

robusta said:


> Will Cochlear have similar legal cases bought against them in the future?




If my memory is correct the patients affected by the COH recall only experienced hearing loss not any pain, overly loud sounds or any shocking sensations. 

So I would think not... but you never know. 

I'm keen for anything that will help drive the price down further!


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## rbgmauq (19 April 2013)

It's clear to me that COH is on its way up and I have to give props to the company. Very little resistance ahead until 66.81.


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## coolcup (25 May 2013)

When this stock first tanked following half year results, it experienced some brief support at ~$70. Following failure of this support level it dropped again finally finding stronger support at $60. It has since rebounded strongly but failed again at the $70 level. Looks to me as though it is heading for another test of $60 support. If that doesn't hold, the downside could be significant. Seems expensive too on a fundamental basis given the growth outlook is somewhat less "bankable".


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## McLovin (3 June 2013)

Getting pumped today. 

For some comparison, this is from Sonova's FY result released late last month...



> Cochlear implants segment: break-even target reached
> 
> Normalized for one-off costs*, the performance of the cochlear implants segment was another highlight in the year under review. Sales rose to CHF 146.7 million, an increase of 52.3% in Swiss francs or 47.1% in local currencies. The business benefited from a full year of sales of its HiRes 90K implant following approval from the US Food and Drug Administration (FDA) in September 2011. The cochlear implants segment returned a normalized EBITA* of CHF 1.8 million, breaking even for the first time. The company also presented significant innovations during the year, including a new processor and a new electrode design that will generate profitable growth beyond 2012/13.




Fair bit of divergence going on there. COH's main competitor is reporting. Given their sales results, they are logically stealing market from COH. It will be interesting to see how this plays out over the next couple of years but that PE ratio looks mighty ripe to get hacked at. They could end up having a couple of flat years as they cede market share to Sonova.


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## skc (3 June 2013)

McLovin said:


> Getting pumped today.
> 
> For some comparison, this is from Sonova's FY result released late last month...
> 
> Fair bit of divergence going on there. COH's main competitor is reporting. Given their sales results, they are logically stealing market from COH. It will be interesting to see how this plays out over the next couple of years but that PE ratio looks mighty ripe to get hacked at. They could end up having a couple of flat years as they cede market share to Sonova.




Opened a short on open. But I managed only 1/5 of the size I want... 

The writing was on the wall for a little bit, esp since they missed out on that Chinese tender.

I guess this is the risk holders bear when the stock price requires sustained perfection...


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## Knobby22 (3 June 2013)

skc said:


> Opened a short on open. But I managed only 1/5 of the size I want...
> 
> The writing was on the wall for a little bit, esp since they missed out on that Chinese tender.
> 
> I guess this is the risk holders bear when the stock price requires sustained perfection...




But they didn't miss out as far as I can discern skc
http://www.afr.com/p/world/cochlear_wins_slice_of_coming_chinese_kcIgVepNUxZZsSxuOJHfKL

Am I missing something?
Always wanted to own this company, particularly as the $A drops. Might be a good chance coming up.

PS a low cost alternative from China is being developed.
http://www.businessweek.com/articles/2013-03-28/a-chinese-hearing-implant-takes-aim-at-cochlear


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## skc (3 June 2013)

Knobby22 said:


> But they didn't miss out as far as I can discern skc
> http://www.afr.com/p/world/cochlear_wins_slice_of_coming_chinese_kcIgVepNUxZZsSxuOJHfKL
> 
> Am I missing something?




Your news is 6 months old!



> - Cochlear (COH $65.96) closed 0.8% lower after competitor Advanced Bionics announced that it has won the second tranche of the annual 4,000 unit Chinese cochlear implant tender. Advanced Bionics also received FDA approval for its new implant product.




From UBS on 30 May 2013.


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## McCoy Pauley (3 June 2013)

skc said:


> Your news is 6 months old!
> 
> 
> 
> From UBS on 30 May 2013.




I think there is a third, smaller tranche to come.  According to UBS, there is a smaller tranche of 1100 units to be awarded by the Chinese.

Today's sell-off was driven largely, it appears, by fears that Cochlear's major market, being the US, is not being as lucrative as it once was.  Growth of sales seemed to be slower than anticipated four months ago, when the half-year results were released.  I also think there's been some delays in the release of the new model of the Nucleus implant.  The decline in the AUD against the USD will not assist Cochlear this financial year.  Given COH's pledge to keep the final dividend at $1.25/share as a minimum, by my rough, back of the envelope calculations, COH is likely to pay in excess of 100% of profits out as dividends this year (factoring in a $1.25/share interim dividend paid in the first half of the financial year).

Looking at a 10-year chart of COH, without professing to be any type of expert at technical analysis, I would say that the area between $43-$45/share is an important range for support.  If COH goes beneath, say, $42.50/share, then I think the next major region of support would be down in the $20/share region.


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## Bazmate (3 June 2013)

Yeah, I reckon I wouldn't have been the only one looking at the $45ish level to pull the trigger.....


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## robusta (3 June 2013)

Bazmate said:


> Yeah, I reckon I wouldn't have been the only one looking at the $45ish level to pull the trigger.....




Well I pulled the trigger a little early, averaged up at $56.23


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## robusta (3 June 2013)

It will be interesting to see how the new Nucleus 6 software goes against the competition. The company seems reasonably upbeat about the future time will tell if that optimism is justified.


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## coolcup (3 June 2013)

coolcup said:


> When this stock first tanked following half year results, it experienced some brief support at ~$70. Following failure of this support level it dropped again finally finding stronger support at $60. It has since rebounded strongly but failed again at the $70 level. Looks to me as though it is heading for another test of $60 support. If that doesn't hold, the downside could be significant. Seems expensive too on a fundamental basis given the growth outlook is somewhat less "bankable".




Looks like this call wasn't too bad. Stock was priced for perfection as already mentioned. Management's commentary today regarding "confidence in the future" really seemed a bit trite for me. An investment in this stock at current pricing is still a bit of blind faith in management credibility which has been sorely tested of late.


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## tinhat (4 June 2013)

Look for support around the $42-$45 level. Cochlear made a lower high in Jan 2013 compared to April 2011.


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## McCoy Pauley (4 June 2013)

As a long-term holder of COH, I'm very interested in the company's long-term performance.  The Nucleus 6 technology appears to be again a market-leader, and I think the company's management justifies the slowdown in sales on the basis that the developed world markets are mature and those possible customers are holding off making a decision until the new implant is available.  That could take up to another seven months according to the AFR this morning in the US (unless people are willing to cross the border into Canada).  Missing out on the China tender would also hurt COH's growth prospects (at least in the short term) in the emerging markets.

I note that, following yesterday's news, Citi has downgraded COH with a 12 month price target of $42.50/share, with estimated EPS for FY13 coming in at 230.50cents/share.  Their estimate for EPS is similar to what I've calculated based on yesterday's announcement.  With the share price fall yesterday, I think the P/E ratio is now under 20x, which would (I hazard a guess) be the first time in quite some time (perhaps since the crash on the recall news) that the P/E ratio is under that multiple.

The AFR articles this morning make for some interesting reading.  It seems that surgeons continue to acknowledge that COH has the best technology but they're badly lagging behind their competitors on the marketing and the "value-add" components of the sales pitch.  Their competitors are providing, it seems, a lot more after-sales service than COH provides.

I suspect we'll see COH's share price base for the next two-three months until the financial reports are released in late August, and those reports could be the catalyst for a move up or a move down in the price.

A lot of speculation in my above post, so DYOR.


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## McCoy Pauley (4 June 2013)

Interesting - up almost 5% on the open this morning.  Looks like some bargain hunters think the time is ripe to move in.  I'd be interested to see the price action over the next few days and weeks, though.


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## skc (4 June 2013)

McCoy Pauley said:


> Interesting - up almost 5% on the open this morning.  Looks like some bargain hunters think the time is ripe to move in.  I'd be interested to see the price action over the next few days and weeks, though.




4 broker upgrades (mostly from sell to neutral) can do that. Closed my shorts on open today and gave back $2 a share.


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## Gringotts Bank (4 June 2013)

skc said:


> 4 broker upgrades (mostly from sell to neutral) can do that. Closed my shorts on open today and gave back $2 a share.




Bring back the chick (the avatar, that is).  It's time.


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## skc (4 June 2013)

Gringotts Bank said:


> Bring back the chick (the avatar, that is).  It's time.




The chick as in a girl? Or the chick as in a fowl? I have used both.


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## Gringotts Bank (4 June 2013)

skc said:


> The chick as in a girl? Or the chick as in a fowl? I have used both.




Feathered variety.


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## skc (4 June 2013)

Gringotts Bank said:


> Feathered variety.




Well I might stick with the dog. It was a good dog. The chick was just something from page 2 of google image.

Anyway - back on topic.


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## McCoy Pauley (31 July 2013)

I'm expecting a tumbling share price today.  The AFR has an article (at least in its online version) reporting on Nurotron Biotechnology gaining approval from Chinese regulators to sell cochlear implants to children under the age of 6, which apparently gives it the right to compete for a government tender in August.

http://www.afr.com/p/business/companies/approval_to_chinese_bionic_ear_maker_8WdNPyRVyUtQXt1HluXO8K


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## skc (1 August 2013)

McCoy Pauley said:


> I'm expecting a tumbling share price today.  The AFR has an article (at least in its online version) reporting on Nurotron Biotechnology gaining approval from Chinese regulators to sell cochlear implants to children under the age of 6, which apparently gives it the right to compete for a government tender in August.
> 
> http://www.afr.com/p/business/companies/approval_to_chinese_bionic_ear_maker_8WdNPyRVyUtQXt1HluXO8K




Looks like the market read your post today!

Don't you hate it when you are right but too quick for the market?


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## McCoy Pauley (5 August 2013)

skc said:


> Looks like the market read your post today!
> 
> Don't you hate it when you are right but too quick for the market?




Haha, yes.  I suppose I could have used the opportunity to lighten my holding but I didn't.

I understand that COH is slated to report full-year earnings tomorrow morning.  It'll be interesting to see if its guidance released in early June is met or whether there's been a further deterioration in the second half of FY13.  COH historically tends not to give guidance for the forthcoming financial year, but I wonder if this will be the report where Dr Roberts breaks their usual silence, given that competition is growing and some shareholders will be worried about COH's future growth prospects.


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## McCoy Pauley (6 August 2013)

Report's out.  NPAT for the year right in the middle of their guidance released in early June at $132.5 million.  The balance sheet is interesting.  Less cash on hand and higher inventory (value almost 30% higher in fact compared to FY12) and receivables.  That could suggest that COH is finding it more difficult to sell products and the customers to whom they sell products are taking longer to pay (though provisions dropped 20% YoY).

Operating cashflow dropped precipitously as well, from $168 million to $70 million in the space of a year, with receipts from customers down 8% and costs paid to suppliers and employees up 8%.

I'd say that it's probably in line with market expectations (haven't checked the market reaction) but COH has some work to do.

ETA - share price down just over 2% this morning.  Interesting to see the media reaction.  According to SMH, COH's profit has "slumped" whereas, according to Business Spectator, COH's profit has "surged".

http://www.smh.com.au/business/earn...fit-slumps-on-us-weakness-20130806-2razh.html

http://www.businessspectator.com.au...hlears-full-year-profit-surges#comment-393201


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## DocK (25 September 2013)

Price up 4.22% today - can't find any news?  Short covering?


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## skc (25 September 2013)

DocK said:


> Price up 4.22% today - can't find any news?  Short covering?




There's supposed to be some news about the last batch of Chinese govt implant tender this week. So may be something in the background that the company didn't announce.


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## DocK (25 September 2013)

Thanks, skc.  I hold so I hope there might be some follow through in the next few days.  Cochlear is apparently the fourth most shorted stock in XJO, so if they manage to claw back market share there's plenty of room for improvement in the share price.


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## Toppy (26 September 2013)

COH has become gambling at this point.

Wonderful stock historically, but downright bleak now. Growth appears less likely and a P/E of 26 would only be acceptable if significant future earnings were anticipated.

Revenue was 810m in 2011, 779m in 2012 and *753m* this year.
Profit was 180m in 2011, 158m in 2010 (excluding recall costs) and *133m* this year.

Debt was 63m in 2011, 66m in 2012 and *170m* in 2013.
Cash was 732m in 2011, 68m in 2012 and *53m* in 2013.

Inventory, receivables and debtor days also jumped in 2013, while net profit margin fell.

So the worries are: (i) Revenue and profit are down considerably. (ii) COH is finding it harder to move its products and be paid for them. (iii) Despite its high ROE, the company paid out 100% of profits and added borrowings to fund the final dividend. It is now net debt. The dividend appears to be a ploy to support the share price. (iv) COH is facing extreme competition from several cheaper implant makers.

I thought COH would survive the recall with its reputation intact, but perhaps it was dented. AFR reports that Merrill Lynch reviewed the global impact market in 2013 and put COH's share at 54%. It was only two years ago that the company boasted having 70%.

The high cost of manufacturing in Australia makes COH the most expensive producer in the world. This is unlikely to improve given the dollar's recent spike and the AMWU's legal moves to force a collective agreement on the company. Med-El and Advanced Bionics seem to be producing quality implants at cheaper prices and this is drinking COH's milkshake (indeed, both companies won parts of the China tenders). Nurotron is an upshot Chinese competitor that sells implants at half the price of COH, and its products are now approved for adults and children in China. There is also an Indian company making moves.

Overall, far too risky for me. I would give it another look if it dips below $50.

_The above is simply my opinion_


----------



## Toppy (9 October 2013)

Following up on this, COH's price looks volatile but bound between ~$57 and ~$63. Still the fourth-most shorted stock on the ASX and most brokers I can see have sell or underperform ratings.

Corrections to my last post: (i) typo in 2011's cash, it should be 72m (does not change the massive increase in debt and loss of cash recently); (ii) "global impact market" should of course be implant; and (iii) Nurotron's product is a quarter, not half, of the cost of COH's according to AFR.

Interesting that these folks have backed down from their recent spruiking of COH:


			
				Motley Fool said:
			
		

> Hearing aid manufacturer Cochlear has had a tough 12 months following a poor full year result and greater competition in its key markets. Cochlear’s share price dropped around 20% over two weeks in May and June when it announced weakness in its key US market and slowing sales pending the release of the company’s newest hearing aid product, the Nucleus 6.
> 
> Cochlear has struggled since the recall of its Nucleus 5 in September 2011, and recently lost a lucrative Chinese contract to competitor Sonova. The 1,500-unit contract means that the company can only sell a maximum of 1,200 units to China this financial year, compared to 2,800 last year. Based on a sale price of $30,000 this may amount to over $40 million, or 5% of revenue.
> 
> I recently sold my COH shares as I no longer believe the company holds a sustainable competitive advantage in the industry, as cheaper alternatives have become available and competitor offerings have become more appealing




That last point is my biggest concern. It seems to me that the frequent claim that "Cochlear has the best quality" is a case of Australian exceptionalism; we want to think ours must to be better than the Swiss, Austrian, American, Chinese competitors. Some evidence to back up the assertion would be welcome but is elusive. If anybody on ASF knows the technical stuff behind implants (certainly I do not) please let us have your thoughts.

Lastly, the discussion around Nucleus 6 confuses me. Nucleus 6 is a "processor" not an implant. COH's actual implant product is many years old (the company having reverted to an old model when the 2011 one was recalled). Surely the growth aspect to COH is increasing global demand for implants?

_The above is simply my opinion_


----------



## clinta44 (9 October 2013)

Im not 100% through the annual report yet... but a few things caught my eye.

Inventory levels at $131.6 Mil up 30 % Inventory days increased by about 50 days  as well…

The other thing was this Otologics IP purchase… If my memory is correct, COH went guarantor for otologics in their loan (and I think we even paid for the privilege),  they went bust so we bail them out to the tune of 14 Mil! And gain their intellectual property… That seems all a bit dodgey… I’m pretty sure the 14 million would have been better in our R&D department… Or distributed into our pockets! 

The man responsible for the manufacture of all COH’s products has: “gained general management experience at Boral and Sunstate Cement, as well as being a consultant for Boston Consulting Group.” What does cement have to do with making hi tech medial devices that get implanted in people’s skulls... Gee I sleep well at night knowing there is NO chance of product recalls ever happening with this guy at the wheel!


----------



## skc (9 October 2013)

clinta44 said:


> The man responsible for the manufacture of all COH’s products has: “gained general management experience at Boral and Sunstate Cement, as well as being *a consultant for Boston Consulting Group*.” What does cement have to do with making hi tech medial devices that get implanted in people’s skulls... Gee I sleep well at night knowing there is NO chance of product recalls ever happening with this guy at the wheel!




Perhaps the bold part is more important.


----------



## McCoy Pauley (15 October 2013)

At the AGM this morning, the chair, Rick Holliday-Smith, announced that COH expected its NPAT for 2013-2014 will likely be flat, with a bias towards the second half.

Unsurprisingly, the share price has dropped considerably - down almost 3% compared to an overall market gain of +1%.

For those with an AFR subscription:

http://www.afr.com/p/business/companies/cochlear_predicts_flat_profit_growth_90DgFDaX2XHGNRGsLz2pTN


----------



## Toppy (16 October 2013)

McCoy Pauley said:


> COH expected its NPAT for 2013-2014 will likely be flat, with a bias towards the second half.




I was shocked by this, given the previous chatter from the CEO and media about Nucleus 6 driving the growth in 2014 that had been priced into COH. Bleak indeed if profit is expected to be flat even with the roll-out of an apparently amazing new product.

Also interesting was the guidance that the $1.27 dividend will continue, presumably funded by more borrowing. Several shareholders expressed disappointment about this at the meeting, management basically argued the company was going through a rough patch and they wanted to help out shareholders (i.e. precisely the point I made above about it being a plot to support the share price).

Having said that, COH held up incredibly well. It dipped at first but bounced up after ~$58. Closing price in line with the average of the last two (volatile) months. Makes no sense to me!

_The above is simply my opinion_


----------



## notting (16 October 2013)

Up drifting good for shorts  now on the basis if this.
A pristine company has gone mediocre pricing itself out of the market with it's rip off products.
Eventually competition will get the better of you and this is happening to COH.


----------



## McCoy Pauley (16 October 2013)

I agree to an extent.

I think the company handled the recall as well as it could have, but then to an extent rested on its laurels and allowed the competition to catch up and possibly even overtake it.  It seems that COH is now bolstering its spend on R&D to play "catch up".

The chair didn't mention it in the transcript of his presentation to the AGM, but in the presentation slides, it's noted that COH has received approval from FDA and Europe for Nucleus 6, which is a positive, but then they go on to note that not all features will be available in the US release.  This implies to me that they've only received partial approval from the FDA for Nucleus 6, which means that their best and brightest hope of recouping sales lost following the recall is diminished.

There was also nothing about COH's success (or failure) to obtain a slice of the action from the Chinese tender.


----------



## Toppy (16 October 2013)

Down a little more today but not breaking the ~$57 floor. Folks seem to be gradually realising COH has well and truly lost its darling status. Article out today with these points:


			
				AFR Smart Investor 16/10 said:
			
		

> UBS attributes a value of $47 per share to the company, which is in line with its 12 month price target, pointing to further share price downside of more than 20 per cent. Based on the broker’s 2013-14 forecasts, Cochlear is trading on a price-earnings multiple of about 27, a substantial premium to the ASX Industrials and the industry group average of 19.3.
> 
> Casting an eye across the last five years, Cochlear is trading on a multiple that is at the upper end of that range during the period, suggesting that a downward rerating is imminent. Given the risks involved in the business, it could even be argued that the company should at least not be trading at a premium to the industry group average, which based on 2013-14 forecasts would imply a share price of $40.70.
> 
> Cochlear will need to reclaim its position as the dominant market force in order to make a substantial and sustained share price recovery. In the meantime, it also has its own internal issues to address including what UBS estimates will be a blowout in its gearing from 33 per cent at the end of 2012-13 to 47 per cent by June 30, 2014.




Can one ever "reclaim its position as the dominant market force" when competitors offer alternatives 75% cheaper? The coming nine months should be interesting. In a way COH embodies a lot of the problems with Australia's manufacturing and industrial relations environment. Stock remains far too risky to my eyes, but I would not be game enough to short it.

_The above is simply my opinion_


----------



## clinta44 (24 January 2014)

I think it might be time for a new CEO. 

Chris Roberts has presided over a massive recall and now a patent infringement. 

One thing after the other, its getting frustrating.


----------



## skc (24 January 2014)

clinta44 said:


> I think it might be time for a new CEO.
> 
> Chris Roberts has presided over a massive recall and now a patent infringement.
> 
> One thing after the other, its getting frustrating.




The infringement lawsuit was filed in 2007 and there's minimal ongoing impact as the infringed patents are either expired or about to expire. The only impact is the $131m damage award which is about $2 per share (and the market priced that in perfectly today).

The bigger problem will be the earning release and their market share performance over the last 6 months. 

COH is the top shorted stock on the ASX... it will be revealed soon whether the bears have got it right.


----------



## clinta44 (28 January 2014)

skc said:


> The bigger problem will be the earning release and their market share performance over the last 6 months.




Your spot on there! that will be very interesting

While the impact of the infringement case is minimal in relative terms the fact of the matter is, COH spend an ever increasing fortune of R&D - so there should be no way we should be getting done for patent infringement...

And on top of that the CEO and KMP keep receiving their STI & LTI payments even though shareholder value is down the can.


----------



## McCoy Pauley (11 February 2014)

skc said:


> The infringement lawsuit was filed in 2007 and there's minimal ongoing impact as the infringed patents are either expired or about to expire. The only impact is the $131m damage award which is about $2 per share (and the market priced that in perfectly today).
> 
> The bigger problem will be the earning release and their market share performance over the last 6 months.
> 
> *COH is the top shorted stock on the ASX... it will be revealed soon whether the bears have got it right.*




I knew I should have sold down my holdings when the share price popped yesterday.  Shocking interim report released this morning. Every excuse under the sun used to justify why the first half NPAT crashed to $21 million.  Only three-four months after the AGM, where COH guided for $130-$135 million NPAT for the year, it's down to $90-$100 million.

By my back of the envelope calculations, the dividends COH has paid out over the last 12 months are almost double the NPAT COH earned since 1 January 2013 - so now COH is eating into their retained earnings to pay dividends to shareholders.  It seems to me that management are desperately trying to stem the share price decline by increasing the dividend payout,  but even now the dividends being paid are completely unfranked, so there's little tax benefit for shareholders.

Management talks a big game in the outlook statement, but they've been proved wrong twice already this year, so what's the bet on a third mis-step?


----------



## skc (11 February 2014)

A big miss by COH. Revenue down, NPAT down, cashflow down, debt up. It was the most shorted stock on the ASX and the bears got this one right.

Company is citing delays in regulatory approvals in new products and reckons that H2 will be an improvement. Yet based on the annoucnement wording it really feels like they are quite a way behind and have to get approval in a piecemeal fashion.

And they continue to borrow to pay dividend. EPS for H1 ~65c when excluding the patent dispute provision, yet they decided to pay $1.27. May be they should be a bit more conservative with their balance sheet. What's the point of paying out so much? As a show of confidence to holders? Please don't destroy a great Australian story!

BTW the damages awarded for the patent infringement was $131m, but they have only provisioned for $20. So if they were to lose the appeal there's plenty more to provision.


----------



## McLovin (11 February 2014)

Meanwhile...



> *Cochlear implants segment: strong system sales*
> 
> The cochlear implants segment achieved sales of CHF 82.0 million in the first half of 2013/14,
> which represents a growth rate of 15.0% in Swiss francs and 16.2% in local currencies. This was
> ...


----------



## McCoy Pauley (11 February 2014)

Plus:



> CAMBRIDGE, Mass. ”” Cochlear implants ”” medical devices that electrically stimulate the auditory nerve ”” have granted at least limited hearing to hundreds of thousands of people worldwide who otherwise would be totally deaf. Existing versions of the device, however, require that a disk-shaped transmitter about an inch in diameter be affixed to the skull, with a wire snaking down to a joint microphone and power source that looks like an oversized hearing aid around the patient’s ear.
> 
> Researchers at MIT’s Microsystems Technology Laboratory (MTL), together with physicians from Harvard Medical School and the Massachusetts Eye and Ear Infirmary (MEEI), have developed a new, low-power signal-processing chip that could lead to a cochlear implant that requires no external hardware. The implant would be wirelessly recharged and would run for about eight hours on each charge




http://web.mit.edu/press/2014/cochlear-implants-with-no-exterior-hardware-0209.html


----------



## McCoy Pauley (11 February 2014)

As previously mentioned, the fundamentals are very disappointing.  I'm not a technical trader, but it looks like there was a symmetrical triangle forming over the past few months, and today's fall (if sustained for the remainder of trade) is a break-out to the downside.  I'm sure there are plenty more experienced technical analysts/traders who can correct my hypothesis, but this does look extremely bearish to me.


----------



## McCoy Pauley (11 February 2014)

One thing that appears to have been overlooked is that COH did win a tender to supply 1800 units for the second half of this financial year, which is 1800 units more than COH supplied in the first half.


----------



## skc (11 February 2014)

McCoy Pauley said:


> One thing that appears to have been overlooked is that COH did win a tender to supply 1800 units for the second half of this financial year, which is 1800 units more than COH supplied in the first half.




If they have won the tender they would have built that into the H2 guidance already. Unless there are further tenders on the horizon this is not real new news.


----------



## McCoy Pauley (11 February 2014)

skc said:


> If they have won the tender they would have built that into the H2 guidance already. Unless there are further tenders on the horizon this is not real new news.




I'd say that's spot on, but it's news in the sense that COH hadn't previously announced the tender win.  I have to say that I'm not sure how much per unit COH receives from the Chinese government for the supply, as I've not seen any figures about it.


----------



## McLovin (11 February 2014)

McCoy Pauley said:


> I'd say that's spot on, but it's news in the sense that COH hadn't previously announced the tender win.  I have to say that I'm not sure how much per unit COH receives from the Chinese government for the supply, as I've not seen any figures about it.




The sales to the Chinese are lower margin. The blurb from Sonova's interim report shows just who is winning the race at the moment. COH seems to be bleeding market share to AB.


----------



## McCoy Pauley (11 February 2014)

McLovin said:


> The sales to the Chinese are lower margin. The blurb from Sonova's interim report shows just who is winning the race at the moment. COH seems to be bleeding market share to AB.




Yes, in the presentation slides COH released to the ASX, they estimated their market share in the US as approximately 60% (with a question mark, which is concerning).


----------



## skc (11 February 2014)

McLovin said:


> The sales to the Chinese are lower margin. The blurb from Sonova's interim report shows just who is winning the race at the moment. COH seems to be bleeding market share to AB.




The recall probably dented their reputation but their regulatory approval process also left a lot to be desired.

This from their announcement...



> The Nucleus ® 6 sound processor received regulatory approval in the key markets of Europe and
> USA and was then launched. Regulatory approval in the USA did not include all features and
> further approvals are being received on a progressive basis.




Are they offering free upgrades to patients who take up their device now? If there's a competitor's product on the market that is complete, you'd choose that over something that hasn't got all the features in place yet, wouldn't you?


----------



## McLovin (11 February 2014)

McCoy Pauley said:


> Yes, in the presentation slides COH released to the ASX, they estimated their market share in the US as approximately 60% (with a question mark, which is concerning).




It is and it isn't. AB's product is newer and COH has some products in the pipeline. I think the salient point is that whereas COH was _the_ product a few years ago and customers would reflexively buy COH implants, even if they were older models, AB is now manufacturing something that is as, at the very least, seen as an alternative. That seems to have removed COH's ability to grow unit volumes right through the product life cycle.


----------



## McCoy Pauley (11 February 2014)

skc said:


> The recall probably dented their reputation but their regulatory approval process also left a lot to be desired.
> 
> This from their announcement...
> 
> ...




Which is why COH have found that sales of their products, particularly in 1Q14, have been very slow.  The question for COH is whether they can win back market share once their products have regulatory approval.


----------



## Toppy (11 February 2014)

I made some negative posts earlier in this thread, but I couldn't have predicted this. NPAT down 73%!

Truly the darling days are long behind us. I'm interested in ASF's thoughts on future prospects. Merrill Lynch put COH's global market share at 54%. They're the most expensive implants on the market. The most recent model is many years old. Alternatives (at least in a technical sense) are available for a quarter of the cost in some places.

My feeling, as sad as it is, is that COH will need to go the way of Holden/Ford/Toyota and offshore manufacturing to bring costs down and compete on price. Short of being out-of-sight technologically superior, COH isn't going to regain its reputation or profitability. And I'm doubtful the Swiss, Austrian, American, Chinese competitors are far behind in technology; some may even be getting ahead.


----------



## McLovin (11 February 2014)

robusta said:


> It is a risky strategy paying high multiples of earnings for future growth. You are right plenty can go wrong. On the few occasions it works out the compounding can work miracles for your returns. Paying a bit over $45.00 just over a year ago I am happy to hold and watch Cochlear for a while yet to see if they can achieve some decent growth. If the growth continues who knows what multiples people would be prepared to pay of those future earnings?




Any change if your thinking, robo? It was an interesting discussion we had at about post 190 in this thread. A year on has your opinion changed?


----------



## robusta (11 February 2014)

McLovin said:


> Any change if your thinking, robo? It was an interesting discussion we had at about post 190 in this thread. A year on has your opinion changed?




Yes my opinion on Cochlear has changed this on my portfolio thread on the 22/10/13



robusta said:


> COH - Cochlear, current market value of $5365.44 up 18.22% on purchase price and 12.03% of the portfolio.
> This is the business that is causing the most consternation at the moment. The initial entry point was lucky, almost at the low point after Cochlear's recall and even then for a normal security too much was paid. Later more were picked up for a bit over $56.00 after the price had fallen from $80.00 plus.
> 
> Cochlear is in the portfolio because of their sustainable competitive advantage, recent results are starting to show that moat may be slowly starting to erode. It is difficult to ascertain if this is short term or more lasting in nature. The trouble with this type of 'slow trading' is by the time I come up with my decision the answer will probably be clear to the rest of the market.  COH has been a core holding for a couple of years, there could be a lesson to be learnt here on paying for growth.




And this from the 29th of the same month.



robusta said:


> *Investment Sold*
> 
> They say you shouldn't get too attached to your shareholdings but I may have become close with this one. This business was considered a core holding being the dominant market leader with a competitive advantage and good growth prospects. Now i'm not so sure COH seem to have stumbled while their competitors have moved forward.
> 
> ...




I should have listened to you back in April last year, I can be more than a little slow.


----------



## McLovin (12 February 2014)

robusta said:


> Yes my opinion on Cochlear has changed this on my portfolio thread on the 22/10/13
> 
> 
> 
> ...




Ahh...sorry, I missed that one in your thread!


----------



## McLovin (22 May 2014)

Looks as though COH is still ceding ground. Maybe when they finally get their new product approved they'll take some back..



> Medical device maker Cochlear is losing market share, says analysis of a strong yearly result from Swiss rival Sonova.
> 
> Sonova reported over 50 per cent revenue growth in its hearing implant division, bolstered by a new product release.
> 
> ...



Read more: http://www.smh.com.au/business/coch...ains-ground-20140522-38qvf.html#ixzz32QKZ5OH7


----------



## McCoy Pauley (28 May 2014)

Half-listening to my podcast of Market Day this morning and I'm sure they said something about Cochlear opening clinics in Australia to directly reach their target market.  But I can't find any confirmation either from a market release by Cochlear or in the general press.

But I did find a couple of articles reporting on a US study concluding that children implanted with cochlear devices are at greater risk of memory loss, albeit the actual study's findings are a little less alarming than the headlines.



> Compared to children with normal hearing, those with the cochlear implants were two to five times more likely to have delays in memory, planning, attention and conceptual learning, processes collectively known as executive functioning.
> 
> But the Indiana University research team also discovered that earlier implantation of a cochlear device reduced that risk. Children who got the implants at an average age of 18 months had fewer delays in executive functioning than those who were implanted at an average age of 28 months.
> 
> The researchers also found that many deaf children develop average or better executive functioning skills after receiving a cochlear implant, according to the study published May 22 in the Journal of the American Medical Association Otolaryngology--Head and Neck Surgery.




http://www.foxnews.com/health/2014/05/23/cochlear-implants-for-children-may-cause-cognitive-delays/

http://health.usnews.com/health-new...with-cochlear-implants-suffer-memory-problems

Further, it's not made public whether the children the subject of the study received implants manufactured by Cochlear or by other manufacturers.


----------



## VSntchr (28 May 2014)

McCoy Pauley said:


> But I did find a couple of articles reporting on a US study concluding that children implanted with cochlear devices are at greater risk of memory loss, albeit the actual study's findings are a little less alarming than the headlines.
> 
> 
> Further, it's not made public whether the children the subject of the study received implants manufactured by Cochlear or by other manufacturers.




As always, any studies picked up by the media will have attention grabbing headlines.
That is something to keep watch on though, if I (or my child) was getting an implant - this is something I would be investigating.



> Half-listening to my podcast of Market Day this morning and I'm sure they said something about Cochlear opening clinics in Australia to directly reach their target market.  But I can't find any confirmation either from a market release by Cochlear or in the general press.



I can confirm I read that this is the case this morning, from Merrill Lynch: "Cochlear has revealed it is investing in direct clinic ownership in certain sites and has opened its first in Melbourne. The broker believes this strategy, indicative of the growth challenges in the industry, has the potential to provide insights into patient capture that have previously been absent."


----------



## McCoy Pauley (2 June 2014)

New product launch announcement sees COH shares rise more than 3% in morning trade this morning.  The Nucleus Profile Implant series with the Contour Advance electrode is the first in the new Profile Series will be launched in Europe through June.  It's based on the CI500 series of implants and apparently has the thinnest implant body on the market.

Announcement here: http://www.asx.com.au/asxpdf/20140602/pdf/42pz4rhtq6kgwj.pdf

I assume that the release will not affect FY13 earnings given it's launched in the last month of the financial year, but I'll be interested to see if COH can claw back lost market share in Europe with this new product offering.

In the interest of full disclosure, I hold.


----------



## McCoy Pauley (2 June 2014)

VSntchr said:


> As always, any studies picked up by the media will have attention grabbing headlines.
> That is something to keep watch on though, if I (or my child) was getting an implant - this is something I would be investigating.
> 
> 
> I can confirm I read that this is the case this morning, from Merrill Lynch: "Cochlear has revealed it is investing in direct clinic ownership in certain sites and has opened its first in Melbourne. *The broker believes this strategy, indicative of the growth challenges in the industry, has the potential to provide insights into patient capture that have previously been absent."*




That's one way of looking at it (thanks VSntchr for posting the excerpt).  COH has traditionally relied on doctors and surgeons to market COH's implants ahead of implants from competitors and presumably part of COH's historically high margins was because it didn't need to spend a great deal each year on marketing and sales.  

While it's great to see that COH isn't resting on its laurels (and lord knows it doesn't given the market share it's ceded to its competitors), I assume that the more direct clinics it acquires and operates, the higher COH's expenditure on marketing and sales will be, which will likely affect the capacity of COH to drive product innovation into the future.  

Further, I assume that COH isn't necessarily relying on its current management to operate these ownership and they're hiring people to run them effectively.


----------



## McLovin (5 August 2014)

Interesting result out today. I've only had a brief look but it seems to me that most of the revenue gains can be put down to two things...

1) Upgrading to new product accounted for 13% of revenue; unless they start churning out a new product like Holden churns out a new Commodore every six months there's a fair bit of one offishness to this.

2) Fall in the AUD. Constant currency sales were; +2% Americas, +10% EMEA, -9% APAC. The APAC number is a concern, imo, because that, and LATAM, is where future organic growth will come from.

Maybe I'm being too pessimistic but this doesn't strike me as a stellar result. The company is still facing headwinds from Sonera and is trading on a pretty hefty multiple.


----------



## McCoy Pauley (5 August 2014)

McLovin said:


> Interesting result out today. I've only had a brief look but it seems to me that most of the revenue gains can be put down to two things...
> 
> 1) Upgrading to new product accounted for 13% of revenue; unless they start churning out a new product like Holden churns out a new Commodore every six months there's a fair bit of one offishness to this.
> 
> ...




The 6.5% jump so far this morning seems to me to be driven by short sellers having to cover their position because reading their results, I do not see how the current price is justified at the moment.

Cochlear implant sales fell 3% in the financial year, although sales in the second half outstripped sales in the first half quite significantly.  Most of the rise in the sales revenue was driven by a falling Australian dollar, with sales revenue up by 3% on constant currency terms.

Cochlear started selling the Nucleus 6 sound processor in Europe and US during the financial year, but still (as at 30 June) hadn't received full approvals from the FDA for all features.  The Nucleus CI512 was launched in Europe and in Asia in the fourth quarter and is awaiting approvals elsewhere.

For as long as I can recall, Cochlear relied on the surgeons and medical practitioners to recommend Cochlear's products over their competitors' products.  But Cochlear invested an additional $10 million in so-called strategic growth initiatives to grow and support the market for cochlear implants.  This implies to me that Cochlear is finding it more difficult to convince medical practitioners to recommend Cochlear products over their competitors' products.  Anecdotally, I've noticed in the last few months that Cochlear has opened a clinic in East Melbourne.

The Asia-Pacific result was clearly negatively impacted by Cochlear's failure to sell units into China (1800 in the second half of 2013/2014 sold compared to 2800 in the previous financial year).

There was no guidance provided for next year's results, beyond some vague references to the opportunities and risks that confront Cochlear.

Debt to equity ratio is 72% compared to 49% last financial year.  From memory, I think Cochlear borrowed money to fund its dividend payment in the hope of supporting its share price.

I sold out some of my holdings after the half-year report and consequently have missed the run-up in share price, but I'm not entirely convinced that Cochlear is on the right track.  I'll continue to hold the remainder of the holdings (mostly due to the huge CGT liability I would incur should I sell) but I'm not comfortable enough to buy back in on the strength of this result.


----------



## skc (5 August 2014)

McLovin said:


> Maybe I'm being too pessimistic but this doesn't strike me as a stellar result. The company is still facing headwinds from Sonera and is trading on a pretty hefty multiple.




If you annualise the H2 numbers then forward multiple is ~25x... which is probably slightly lower than where they have traded historically (granted that it was a somewhat different company, historically).



McCoy Pauley said:


> The 6.5% jump so far this morning seems to me to be driven by short sellers having to cover their position because reading their results, I do not see how the current price is justified at the moment.




Yes. Most shorted stock on ASX. I caught about $2.80 on the spike, but then gave a bit back trying to short it from the morning top. 



McCoy Pauley said:


> I sold out some of my holdings after the half-year report and consequently have missed the run-up in share price, but I'm not entirely convinced that Cochlear is on the right track.  I'll continue to hold the remainder of the holdings (mostly due to the huge CGT liability I would incur should I sell) but I'm not comfortable enough to buy back in on the strength of this result.




May be worthwhile looking for some form of hedge?



McCoy Pauley said:


> Debt to equity ratio is 72% compared to 49% last financial year.  From memory, I think Cochlear borrowed money to fund its dividend payment in the hope of supporting its share price.




Yes...albeit not as bad as last report. Operating cashflow $111m, investing -$32m, dividends paid -$145m and net borrowing $67m. 

Just hit $68. I say this finishes at close to the high today, opens higher tomorrow and gets sold back down to $64 before end of the week.


----------



## McLovin (5 August 2014)

skc said:


> If you annualise the H2 numbers then forward multiple is ~25x... which is probably slightly lower than where they have traded historically (granted that it was a somewhat different company, historically).




Except that the H2 is when they released the new units, which accounted for 13% of annual revenue so c.p. 26% of H2 revenue (H214 sales were up 28% on H213...which looks almost like it the entire difference was upgraders). I'm not sure I'd trust the results of H2 as a foundation for extrapolating forward.

Up 9% today, so I must be missing something here!


----------



## McCoy Pauley (5 August 2014)

Having a bit of a closer look, COH put aside about $22.5 million for the patent dispute which COH lost but is appealing.  Add that back to the NPAT, and underlying NPAT becomes $109.5 million for the twelve months, which would be above consensus.

I think a lot of people buying in today are hoping that the company's performance has finally bottomed out and that the results from the second half of the financial year set the scene for an uptick in the company's performance going forward.


----------



## VSntchr (6 August 2014)

skc said:


> Just hit $68. I say this finishes at close to the high today, opens higher tomorrow and gets sold back down to $64 before end of the week.




Didn't open higher but has since surged higher....almost at $71 now...
I tend to agree that it will probably end the week closer to where it started.

Funny that all the broker reports coming out this morning are sell, reduce or neutral at best..yet it goes up another 2%...surely its a squeeze right?!


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## McLovin (6 August 2014)

VSntchr said:


> Funny that all the broker reports coming out this morning are sell, reduce or neutral at best..yet it goes up another 2%...surely its a squeeze right?!




Yeah. This from Macquarie today is pretty typical.



> Underlying patient growth however remains elusive: Although growth was
> impressive for BAHA (+21% cc in 2H) and sound processor upgrades (+14%
> cc in F14), the best measure of underlying growth for COH remains new
> patient unit sales due to it (i) accounting for 74% of group sales and (ii) not
> ...


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## McCoy Pauley (6 August 2014)

The brokers have been consistently bearish on COH for some months now, but the share price has been moving in the opposite direction.

I concur with Macquarie's analysis of the results.  They don't read to me as a set of results that would support the share price spike we've seen since their release.

I'm still continuing to hold but I'm not likely to rush out and buy more at this point.


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## McCoy Pauley (23 August 2014)

According to the AFR Street Talk column, relying on data compiled by CBA Equities and ASIC, Cochlear remains the second most shorted stock on the ASX-200, with 15.4% of the stock on offer still shorted, compared to 16.1% last week.


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## edgykativu (26 August 2014)

not so good looking you cant beat the asian on making cheap stuff


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## trinity168 (22 September 2014)

edgykativu said:


> not so good looking you cant beat the asian on making cheap stuff





How willing are people to buy the cheap knockoff?


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## mahen142 (11 February 2015)

*Cochlear (COH)*

Anyone investing in Cochlear (ASX:COH)? Would it be a good investment to get into at the moment?


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## JJZ (12 May 2016)

Not a good day for COH today, was there an announcement? I cant find any reason behind this....


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## qldfrog (12 May 2016)

was wondering as well; fall of AUD should logically increase COH?


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## Porper (12 May 2016)

Not too concerning as COH can have a few wide ranging bars. However, wouldn't want to see too many more day's like today. Maybe it needs to come down to revisit minor support around $107 before resuming higher.

I hold.


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## Triathlete (12 May 2016)

I would not be to concerned with COH today.

I have added my analysis of COH.

If we look at the last retracement range No2 red to No 1 red we can see that it retraced only 38.2 % this indicates that at this point in time the stock is strong and will likely move up 100% which it almost got to $117.26...we can see the natural level at $117 and the 100% level at $118.91.

This stock seems to move in around $12.50 moves and as you can see on the chart we have a resistance level here at $117.

What I would be looking for from here is to see if the stock comes back no more than 50% retracement $97 and then continues its move up.

Fundamentals from stock doctor.

EPS 26.82
Lincoln valuation $90.02
Consensus valuation $98.55


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## skc (12 May 2016)

JJZ said:


> Not a good day for COH today, was there an announcement? I cant find any reason behind this....




The perfect ruler indicates an institution selling with a bot in a controlled manner. It wasn't a massive dump as would be the case if it was news driven. So most likely just someone rebalancing their portfolio.

COH has been hot in the last 2 weeks and today's move barely bring it back to the level 4 days ago. 

Technically perhaps more profit taking. Fundamentally I don't think you can read anything into it.


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## Tano (23 August 2016)

Hi All,  Im a student doing a Cost of Capital assignment and i am a little confused about calculating the cost of equity using CAPM.  Can anyone confirm if these figures look correct?


All Ords Market Return for July 1st 2015- June 30th 2016 (All Ordinaries weekly closing prices)
  = (Final Index Value - Initial Index Value) / Initial Index value
  =  ( 5,310.40 -5,528.00  )/ 5,528.40 
  = -3.94%

Cochlear Return
Capital Gain = (Final Weekly Closing Share Price - Initial Share Price)/ Initial Share Price
=($119.73 - $77.49) / $77.49  
= 54.51%

Then use excel regression analysis using the weekly closing prices for All Ords vs Cochlear (adjusted for dividends) and we get a beta of 0.28. How can the beta be so low and cochlear returns ~ 54% share growth vs all ords 3.94% loss?  

Rf= 10 year aus government bond yield - 1.9%
Re =  1.9% + 0.28 (-3.94% -1.9% )
       =1.35% 

Note: In financials has calculated the levered beta at 0.17 but may have use daily closing prices and a different date range
http://www.infinancials.com/fe-en/30097AA/Cochlear-Limited/Beta


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## PharmBBs (3 December 2016)

Does anyone have much info on their patents and direct competitors (apart from SONOVA) ?


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## Redbeard (4 April 2017)

maybe not!
does anyone have a good perspective on why this stock seems to be a "darling" of the Brokers and why its value varies so much??  used to be at $50 and now is $135!!!  only in a few years and then back down again!!


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## Redbeard (31 October 2017)

And today just tipped $176 !!  up $20 since June 17.
Anyone have any reason why?


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## peter2 (27 April 2018)

I like this sort of price action. There's a strong monthly and weekly UP trend. Our job is to buy when there's an acceptable RR setup in the daily chart. The chart shows that after a new all time high, price drifted down with the market (XAO). It's worth noticing that this pullback in price was on lower volume. So low, that the volume indicator (TMF) didn't drop at all. Price then bounces off a prior BO level and continues up to another all time high. 

It's worth looking for these pull-backs in strong weekly trends that are done on lower volume. 

I'm aware that the difficulty with COH is the low daily volume and thin MD.


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## lindsayf (28 April 2018)

My mother bought 2000 shares in COH in 1996 at $2.50.
Not a bad pick.


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## Redbeard (1 June 2018)

looked at over $200 today!   
any thoughts where it will go before EOY???


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## Redbeard (4 June 2018)

lindsayf said:


> My mother bought 2000 shares in COH in 1996 at $2.50.
> Not a bad pick.



And in 2040 some might say $200 was a good buy!!    Ohh BTW I got mine at $3.00


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## Redbeard (4 June 2018)

qldfrog said:


> was wondering as well; fall of AUD should logically increase COH?



Same has happen in the last week this year..  Probably due to most of the customers being overseas , mostly in USA. So one sale results in equivalent of 1.2 sales (??) in Aust.   
working out exchange rates and company profits is difficult!?!  Almost impossible unless you have a Cray!


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## Redbeard (4 June 2018)

So I am outta here A.T.M., cashed out today.  Has been a strange ride.  But I am happy with my return. very happy...  gee I think I said that last year ...   anyway down to zero now.

but if the ever drops 30%     I'll be back!.


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## Dona Ferentes (16 March 2020)

Cochlear, which last month warned its revenue would be hit by the deferral of implant surgeries in China as the nation dealt with the virus outbreak, *abandoned its profit FY20 guidance completely.*


> “The business has been on track to deliver its earnings guidance driven by strong growth in cochlear implant system sales across the developed markets,” chief executive Dig Howitt said. “However, we expect to experience a significant decline in sales in the immediate future.”


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## sptrawler (16 March 2020)

Dona Ferentes said:


> Cochlear, which last month warned its revenue would be hit by the deferral of implant surgeries in China as the nation dealt with the virus outbreak, *abandoned its profit FY20 guidance completely.*



May be well worth putting on the watch list, you never know what can happen, in this sort of market.


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## qldfrog (16 March 2020)

At the start, coh was branded a medical stock and was not hit, now people realise that noone is going to get an implant in the next 6 months..min...
Was it that hard to see?


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## sptrawler (16 March 2020)

qldfrog said:


> At the start, coh was branded a medical stock and was not hit, now people realise that noone is going to get an implant in the next 6 months..min...
> Was it that hard to see?



I just hope I can buy CSL back at $27, same as last time, just after the GFC.
From memory, I think COH got to just under $40 at the same time, but I didn't buy any.


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## Dona Ferentes (25 March 2020)

Cochlear is in a trading halt, set for a capital raising.

This will test the market. Opportunitistic or in need?


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## frugal.rock (8 April 2020)

Day traded today.
In at $177.30
Out $ 187.00
5.2% net profit.
The entry was a bit off.
Happy with the exit.

F.Rock


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## Dona Ferentes (15 December 2020)

Cochlear must fork out $US280 million in damages and $US75 million in legal fees after exhausting all of its appeal options in a patent infringement case.  It announced the US Supreme Court had denied its petition for a review of the US Federal Circuit Court's decision to uphold the damages against it as a result of a lawsuit by the Alfred E. Mann Foundation for Scientific Research and Advanced Bionics. 

- _factored in._


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## Trav. (2 January 2021)

I often get a bit put off when reading trading books and find examples ( many cherry picked ) to demonstrate a system or concept, but it was refreshing to come across COH today and find a wave pattern that behaved as per my thoughts although it could have a abc corrective phase after the completion of the wave 5

_As disclosed many times before I am still learning so feel free to jump in and correct me if wrong or missing something in my logic._

Basic Wave Principle (This is my level at the moment   )






Recent example of waves 1 to 5 followed by retrace






So now I am wondering how far down the retrace will go as at the start of the Wave 1 the low was $187.03 and we are not to far from that now ( $189 ) as the theory is that the cycle will start again. ie up 5 down 3.

Looking at the above we probably do not fit the mold but I like the idea of trades that are oversold and rebound once we confirm the pivot point. 

- Are we at that point now? maybe not but I think that we are close. 
- Will the $187.03 be support ?

Next we have the Weekly chart which is another interesting chart which sort of backs up the above with a possible pivot point in Wave 2 and Dual Look Back is in oversold territory.

So put the 2 together and we might be onto a possible trade opportunity






Thoughts ??


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## Dona Ferentes (19 February 2021)

Cochlear will return $24 million in JobKeeper money and restart paying dividends, after the return of surgeries around the world boosted sales.


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## Dona Ferentes (5 February 2022)

*Ally Selby: *And welcome to _Livewire Market_’s *Buy Hold Sell.* I’m Ally Selby. And as many of you know, markets have been off to a rough start in 2022, with the S&P/ASX 200 down around 7 per cent.

So, which companies can help you sleep at night and weather the volatility ahead? Glad you asked. Today we’re joined by Bruce Williams from Elston and Simon Conn from IML.

First up we have Cochlear, which is a global leader in implantable hearing devices and a favourite in many long-term investors’ portfolios. Bruce, I might start on you. Is it a buy, hold or sell?

*Bruce Williams (BUY): *_It's a buy for us Ally. We like it. It’s an under-penetrated market. It’s got proven benefits for its recipients. The valuation is what we would consider reasonably high, but given its runway, the quality of what it does, its market position, we think it’s a terrific stock._

*Ally Selby: *Over to you, Simon. It obviously suffered during lockdowns, with elective surgeries on ice. But in October, Cochlear provided a net profit guidance up 12 per cent to 20 per cent for FY22. So is it a buy, hold or sell?

*Simon Conn (SELL): *_For us, it’s a great business, but it’s trading at a great price. So it’s clearly a sell for us. I think a lot of the good news is already embedded in the price, and I think it fits in that basket of stocks that have benefited artificially from ultra-low interest rates, where investors have attributed a multiple to future earnings. So 40 times, going towards 30 times next year’s earnings, we just think there’s a lot of good news already in the price and so it’s a sell for us._


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## Dona Ferentes (16 March 2022)

*Matthew Kidman:* Welcome to Buy Hold Sell, brought to you by Livewire Markets. My name is Matthew Kidman, and today we’re going to wind back the clock and talk about dividends. Yes. Remember that? That’s what we used to search for in companies before growth became the dominant theme.

Now it’s back to dividends. And to talk about that, we’ve got Blake Henricks from Firetrail and Michelle Lopez from abrdn.

*Matthew Kidman:* Never thought I’d be saying this, Cochlear, one of the great growth stories of Australia, not a bad yield. Buy, hold, or sell?

*Michelle Lopez (BUY):* It’s a buy. So I agree with you. It’s not often I talk to Cochlear as a dividend stock. It isn’t a high-yielding stock, but what it is, is it’s a growth yield and a growth dividend.

This is a company that is spinning off a lot of cash. They’re unwinding their CapEx programme. They’re at the tail end of that so the free cash flow that they’re spinning off is very high. They’ve got $500 million of net cash on their balance sheet.

So I think there’s further growth in the dividend, but importantly, operationally, they’re just executing well. They’re super consistent in what they do. They’ve got a really clear strategy and invest for the future for growth. So that runway of growth, whether it’s earnings or whether it’s dividends, is very clear. So it’s a buy.

*Matthew Kidman:* I like that, growth yield. It’s been tough for Cochlear. A couple of years, hospitals closed around the world. Things are opening up. Buy, hold, or sell?

*Blake Henricks (HOLD):* I think it’s a hold, but I think if you’re buying it for a dividend, I had a look online, and I actually got a three-year term deposit quote from Judo Bank at 1.55 per cent. So that beats Cochlear’s 1.5.

So I think, for a dividend, it’s a sell. But the market’s growing. Their holding share in the US, growing a bit in Europe. It’s fine, but I’m not buying it for dividends.


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## Dona Ferentes (16 March 2022)

Sales of Cochlear implant units bumped up 7 per cent to 18,598 units over the half, with the bulk of gains in emerging markets. In developed markets, hearing implant volumes slid by 2 per cent, though CEO Howitt pointed out volumes overall were tracking ahead of pre-COVID-19 levels despite variability across different countries.

Overall, total sales revenue jumped 10 per cent to $815 million, and Cochlear lifted the interim dividend by 35 per cent to $1.55 a share, representing a payout of 65 per cent of underlying net profit.

Services revenue grew strongly in the first half, with revenues up 21 per cent in constant currency terms to $256.5 million.

Cochlear boss Dig Howitt says spending big on raw materials and semiconductor inventory will allow the hearing implant maker to ride out future ructions in global supply chains, which have been squeezed as the fight for semiconductors rages.



> “_When COVID-19 hit, we needed to make sure we kept our customers on air,_” Mr Howitt said in an interview. “_We deliberately built up our inventories as a buffer to any shortages, but it’s also meant we have run the supply chain more efficiently which has helped us expand the gross margin._”


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## Dona Ferentes (17 August 2022)

The US Food and Drug Administration (FDA) on Tuesday adopted a final rule to create a new category of over-the-counter hearing aids that can be sold directly to millions of Americans. These will be available through drug stores and other chains from the middle of October.

An estimated 30 million plus Americans need hearing assistance at some level, according to industry groups.

The change isn’t sudden, it has been talked about for a year or more and in 2017, the US Congress passed legislation requiring the FDA to create a category of over-the-counter hearing aids, but it was not fully implemented.

Cochlear’s products are more advanced and are for people with severe hearing impairment. They are very different and far more complex than the products that will be sold in the US in stores and other outlets from October.

But the danger is that many people on the borderline will opt for the new products without medical checks to see if they are suitable which could drain some potential customers for Cochlear’s products.


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## sptrawler (17 August 2022)

The daughter has a cochlear, she has worn hearing aides all her life and now has to move on to a cochlear, as the report states it is focused on a different market than hearing aides. Thanks for the post @Dona Ferentes


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