Nobody saw it coming. Cochlear made a release on 11 March saying that the US Department of Justice had made a request for information from Cochlear's US subsidiary. Apparently no specific allegations have been made at this point but the matter is serious and the document gathering process could take up to six months.

The problem seems to relate to dealings between the company and doctors in the US and could lead to 'criminal sanctions' according to Cochlear's release. Management expects the costs associated with the investigation to be 'material', although not quantifiable at this stage.

While this is obviously not good news, we'd be more concerned about the future of Cochlear if the news related to the company's products. To the best of our knowledge the products remain fine, the concern is simply over the way in which they have been sold. That being the case, we view the fact that the shares are down 16% since last issue (Long Term Buy-$22.80) as a good buying opportunity. Further falls wouldn't surprise us given this issue will hang over the stock for the next few months at least. But we don't try to pick the market's short-term twists and turns. We simply try to buy stocks for less than we think they are worth. And Cochlear now falls squarely into that category. We're upgrading our recommendation to an outright BUY and purchasing 420 shares for our growth portfolio.