How To Buy Cochlear (COH) Shares

Cochlear Limited is a publicly-listed company on the Australian Securities Exchange (ASX) with the ticker symbol COH. It’s known for its revolutionary medical implants that give people the ability to hear.

More than 750,000 cochlear devices have been provided to patients to treat hearing impairments and make it possible for children born deaf to learn to communicate effectively using speech and language.

An Inspired Aussie Invention

Born out of Sydney, the cochlear implant was the brainchild of Australian inventor Professor Graeme Clarke AC who was inspired to become an ear surgeon and neuroscientist after witnessing his father’s struggles with hearing loss.

Building on his research into electrical stimulation of auditory pathways in the late ’60s, Prof Clarke developed the first multi-channel cochlear device, which electronically stimulates nerves in the inner ear to transmit sounds to the brain. Australian man Rod Saunders became the first patient to receive the new cochlear implant in August 1978, with the surgery performed by Prof Clarke.

A Global Success

Cochlear Limited launched in 1981 and listed on the ASX 14 years later in 1995. Its headquarters are located on the campus of Macquarie University, but it operates globally—with offices in Asia-Pacific, Europe and the Americas, six manufacturing sites, and a distributed workforce of more than 4,800 employees.

Selling its medical devices and services into more than 180 countries, Cochlear generates around $1.9 billion in revenue annually across three core business areas: cochlear implants; services, including sound processing accessories; and acoustics—which refers to its bone conduction systems that use a different method (vibrations that travel through bones in the head) to transmit sound.

Cochlear’s end of year results to June 2023 showed its profits increased 10% and dividends increased by 21% with a final dividend payout of $1.75 per share. The company expects an increase of between 16% to 23% in 2024 to achieve net profits of between $355 and $375 million.

Market Share and Shareholders

Patients who receive a cochlear implant are generally customers for life, as the sound processors that support the implants need to be updated about every five years, or as better-performing tech becomes available.

With 60% of the global market share for implantable hearing devices but just 4% of market share in the broader hearing loss segment (where hearing aids dominate), Cochlear sees an opportunity to expand its customer base. In particular, the company is targeting older adults, citing research that found treating age-related hearing loss slowed cognitive decline in at-risk older people by 48%.

COH share ownership is pretty evenly split between retail investors and institutional investors (including BlackRock, State Street Corporation, ABP and Pinnacle Investment Management Group). Cochlear requires its top-line managers to hold and maintain company shares equivalent to their previous year’s annual salary as a means to strengthen alignment between executive and shareholder interests.

Cochlear’s share price jumped almost 8% to $251.6 upon release of its financial statements in August 2023, and at the time of writing it was further ahead at over $260 per share. The average forecast for Cochlear’s share price a year from now across multiple analysts is $245.45 per share, with the highest price target at $294/share.

As a constituent in the ASX 50 index, Cochlear (ASX:COH) is one of several large-cap healthcare stocks—alongside CSL (ASX:CSL) and ResMed (ASX:RMD)—that is generally considered a high-quality investment. Despite COH being one of the more expensive shares on the ASX many investors remain overweight, meaning they think the stock still represents good value and has room to grow.

Growth Prospects for COH

Goldman Sachs believes COH shares will be boosted by the company’s multi-year buyback program which began in March this year. By gradually reducing the number of shares on issue—lowering its cash balance to around $200 million in the process—Cochlear’s goal is to grow the value per share, and dividends per share, over time.

The company’s capacity to keep innovating, and successfully expand its customer base, will likely be critical to its continued high valuation. An ageing population seems to lend weight to its strategy of improving the diagnosis and treatment of age-related hearing loss.

In a 2022 interview, the editor of Biotech Daily, David Langsam commented, “Cochlear seems to be a bit stuck, we keep on waiting for a new invention and they haven’t thrilled the market with it.” However, a positive indicator is the company’s commitment to research and development, with 12% of its revenue going to R&D and more than $2.7 billion invested since it was first listed.

The company expects its upcoming acquisition of part of Oticon Medical’s business to add around $10 million in revenue annually. While a proposed full merger was contested by regulators in Australia and the UK, Cochlear was given the green light to buy Oticon’s cochlear implant business, which should be finalised in December this year.

As well as buying individual Cochlear Limited shares directly, you can gain exposure to the stock by investing in a broad market index managed fund or exchange-traded fund (ETF) that provides instant diversification. These include:

• iShares Core S&P/ASX 200 ETF (IOZ), which tracks the performance of the ASX 200.
• Vanguard Australian Shares Index ETF (VAS), which tracks the top 300 ASX companies.

Cochlear Limited is also included in the holdings of more targeted ETFs including:

• Betashares Australian Sustainability Leaders ETF (FAIR), which screens local companies on ethical grounds.
• iShares Global Healthcare ETF (IXJ), which provides access to global pharmaceutical, biotechnology and medical device companies.

To access unlisted managed funds you’ll need to liaise directly with the investment firm running the fund. You can also work with a full service stockbroking firm who can execute trades on your behalf (which may incur higher fees)—whether you want to directly hold Cochlear shares or invest in pooled funds.

To self-manage your investments in securities listed on the ASX, you can use online stockbroking platforms to buy shares and ETF/listed managed fund units.

Follow these steps to get started:

1. Find a brokerage app you trust: Review and compare share trading platforms with a mind to finding one that’s registered with ASIC, provides access to ASX shares, has transparent and reasonable fees, is user-friendly and offers good support.
2. Sign up and add money to your account: You’ll need to step through the online broker’s account set-up process which may include verifying your identity. Then you need to transfer funds into your account—at least enough to cover any minimum trade amounts and transaction fees.
3. Place an order for Cochlear shares or a fund that includes COH in its holdings: Inside your account, search for COH or the symbol of the fund you want to invest in, then select the number of shares or units (based on the amount you want to spend). You can either purchase immediately at the stock’s current price (known as a market order) or use other order types— such as stop or limit orders—to set conditions around when the trade is made. For example, you could use a limit order to buy only when the stock price drops below $250.

You can sell your cochlear shares at any time in the same way you bought them, by placing an order via your chosen stockbroking app. Knowing when to sell your shares will come down to your individual financial needs, investment plan, and view of the company’s future.

Once you’re a Cochlear shareholder, it’s important to stay abreast of how the company is performing and any ‘big picture’ trends that could affect its valuation. That prepares you to judge whether it still represents a good investment long-term.

If you need cash, you might sell COH shares when its price spikes to take advantage of gains. Remember that profits made on shares count towards your taxable income, which includes both dividends and capital gains.

The advice and information provided by ForbesAdvisor is general in nature and is not intended to replace independent financial advice. ForbesAdvisor encourages readers to seek expert advice in relation to their own financial decisions and investments.