Speaking at the Bank of America investment conference in New York, Cochlear’s (ASX: COH) CEO Chris Roberts admitted that poor investor confidence regarding the company has him puzzled, seeing it as “the biggest disconnect [in his nine and a half years as CEO] between that negative sentiment and actually what we’re doing as a company”.
Although the company’s shares have taken a battering on a number of occasions in recent years, caused by product recalls and increased levels of competition in the global market, Roberts stated that “there are a lot of really exciting things going on,” referring in particular to the level of investment in innovation being undertaken by Cochlear.
Roberts reassured investors that the company remains “the market leader and we have not let up on technological innovation… There is no company in the world that is out-innovating us in this space.”
According to The Australian Financial Review, there is plenty of pessimism surrounding the company’s value with many believing that the company’s share price has further to fall. With roughly 11% of its shares on issue being held in short positions, Cochlear represents the fourth most-shorted stock on the bourse.
Through continued innovation however, Cochlear has continually delivered outstanding returns to shareholders, and has been one of the Australian sharemarket’s most consistent performers over the long term. For instance, at today’s price the stock has climbed around 225% since 2004.
Meanwhile, despite having increased its number of customers to receive implants last year by 16% to 26,674, the stock is down almost 27% since the beginning of the year.
Increased levels of competition have been one of the primary concerns shared by investors. Whilst the company still controls 65% of the market, a number of companies from around the globe are threatening its market share.
However, it is important for investors to realise that competitors were always going to enter the market. Whilst other companies from around the globe may be able to offer cheaper products or put pricing pressure on Cochlear, the Australian company develops its products at the highest quality, with plenty more products still in the pipeline.
When it comes to health and lifestyle decisions, consumers will look to quality and, as such, Cochlear should continue to produce excellent returns for years to come.
Whilst the company is aiming to “create momentum in the second half of fiscal 2014 to fiscal 2015”, it is the long term that investors should be getting excited about. The company maintains operations in more than 20 countries and sells its products in over 100, making it one of Australia’s global success stories.
The Australian healthcare sector holds enormous future potential. While Cochlear presents as an excellent opportunity, it is also well worth keeping your eye on promising companies such as ResMed (ASX: RMD) or Acrux (ASX: ACR).
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Motley Fool contributor Ryan Newman owns shares in Cochlear.