Cochlear – Buy

Cochlear recently completed an $850mn equity raise via an institutional placement at $140 per share. The capital raise now removes any balance sheet concerns.

Following the placement, we estimate COH will have total liquidity of
$1.0bn+  with little in the way of debt maturities until 2022.

The pathway back to elective surgery appears to be improving and we, therefore, see the current price range as an opportunity to accumulate COH shares.

 

COH – Algo Buy Signal

Cochlear is now under Algo Engine buy conditions and has been added into our ASX 100 model portfolio.

Whilst the FY19 result came in at the bottom end of guidance, the company upgraded the FY20 outlook. We now expect 10% EPS growth over the next 12 months.

The stock remains expensive at 40x FY20 earnings and trading on a 1.8% yield.

 

Cochlear – Algo Sell Signal 

Cochlear is under Algo Engine sell conditions following the lower high formation at $200. The share price has since traded lower on concerns surrounding competition in the hearing implant market.

We expect COH could suffer from increased competition in cochlear implants, sound processors and bone anchored implants. Earnings have been downgraded over next few years to reflect this.

Healthcare Algo Buy Signals

At this point in the market we prefer healthcare names as a sector allocation for new money. Here are the recent buy signals generated by our Algo Engine.

With SHL, CSL and ANN we’ve added covered calls to boost the annualised cash flow to over 10%, whilst still allowing for capital growth if exercised at the strike price of the sold call.

 

Chart – SHL

Chart – COH

Chart – RHC

Chart – ANN

Chart – CSL

Higher Low Pattern Stocks to Add to Your Watchlist

The following group of stocks are in either established uptrends or, in recent months they’ve broken downtrends to begin building the early stages of a bullish “higher low” formation.

Many of these names have been mentioned previously in the blog and/or the monthly strategy video report. It’s worth loading these codes into your watch list and considering rebalancing your portfolio to include allocations towards some, or all of these names:

JHX, LLC, MQG, SHL, TWE, ANN, ANZ, ASX, CCL, CIM, COH, QUB, TAH, WOW & WPL.

With the lower growth names within the above basket, such as WOW & CCL, we compliment the position now with tight covered calls to enhance the yield to 10%+ per annum. With some of the other names, we give a little more breathing space as we expect 5 to 10% price appreciation before selling the call option overlay.