In today’s daily we have covered stock research on Cochlear. To view 5 Mining Stocks To Buy and Top 40 ASX Dividends, please click on the link.

S&P 500 was down by 17.39 points or 0.95% to 1815.69 on Friday. S&P 500 capped its worst week since 2012 with stocks plunging amid concern that valuations have climbed too high as earnings season starts. S&P 500 fell 2.6 percent for the week to 1,815.69, as the index erased its gains for the year. With high valuation stocks under pressure the earnings for companies this season could be subjected to even more investor scrutiny than usual.

The nervous mood was reflected by a 21 percent jump last week for the CBOE Vix volatility index. We believe that there is little evidence to corroborate the market’s valuation fears and that the comparisons with the bursting of the dotcom bubble were misplaced. The technology sector is much less overvalued than it was back then. The Fed is still buying a significant amount of bonds and thus providing a lot of liquidity but clearly only for a few more months, this is creating a lot more tension in the equity markets than expected.


S&P 500 Daily Chart   (Source – Thomson Reuters)
 
S&P ASX 200was down 52.20 points or 0.95% on Friday and closed at 5428.60 points. Australian shares fell almost 1 percent on Friday, retreating from a near six year high after a sell off on Wall Street affected the market sentiment while Coca Cola Amatil sank to a 4 year low after the beverage firm issued profit warning.Origin Energy’s credit rating has been downgraded to negative by Standard and Poor’s. Ten Network reported a narrower loss in the first half last week. Ten posted a loss of around 8 Million Dollars versus a year ago of A$243.3 million.


S&P ASX 200 Daily Chart (Source – Thomson Reuters)


The top gainers on ASX 200 were:- 



Stock of the Day – Cochlear (COH)

Cochlear was founded in Australia in 1981 to commercialize the Cochlear implant technology, used for the treatment of the profoundly deaf. It listed on the ASX in 1995. In 2005 Cochlear acquired Entific Medical Systems for its “Baha” bone anchored hearing implant systems, used to treat conductive hearing loss and single sided deafness.

Cochlear’s first half fiscal 2014 result was below expectations, with the company also downgrading full year guidance. Underlying Net Profit after Tax (NPAT) was AUD 36.8 million, down 53% on first half 2013. The company had flagged first half weakness due to a negative currency hedge impact and lower sales in the first quarter as patients waited for regulatory approvals for new products.


Source - Cochlear

It appears that approval have taken longer than expected. We believe tougher competition may also be contributing to market share erosion in the USA which has fallen to 60% from 65% reported at the last result and historical levels averaging around 70%.


COH Daily Chart  (Source - Thomson Reuters)
 
Cochlear’s reputation for technological innovation and reliability in a highly specialized medical science niche and strong intellectual property position represent strong competitive advantages. Hearing loss continues to beleaguer both individuals and societies worldwide causing significant social and economic costs. The company continues to see market pressure in the USA where it does not have expected regulatory approvals. We believe the stock is slightly overvalued at its current price and would review the stock at a later date.

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