Commencing coverage

I search for stocks that trade way below what they are worth, the stocks that are smashed by short sellers, the ones that weak hands fear to hold. When CDD went below $3 in recent months, I saw an opportunity to get cheap entry. In the past decade there has only ever been 2 opportunities to enter CDD below $3, this was during the GFC in 2009 and way back in 2004. Before I go further you need to understand the quality of CDD;

Background-
Cardno limited is a very high quality business specialising in the field of professional infrastructure and environmental services, the company started operations in 1945 and has expanded on a global scale employing over 8,000 staff, and securing 50 mergers. In their tenth year listed on the asx CDD had made record revenue of over 1 billion dollars. They have an exceptional business structure, their management are 100% focused on SH returns, they are aspiring to be one if the top 20 design firms globally.

They love SH's
Cardno has always paid a very healthy franked dividend and refused to dilute their funds. Only 162 million shares issued to date.

The misconception
Since the company flagged profit warnings, impairments and the resignation of CEO Michael Renshaw, Cardno limited has taking a major sell off from highs of $7.50. A sell off which i believe to be one of the biggest over reactions I've seen this year.

Where quality counts
Management have swiftly implemented cost reductions across their entire business, these savings will eventually flow through. They have improved efficiencies which will allow them to undertake their record amount of back logged work estimated at $935 million. Approx 50% of their revenue has come from the US, the drop in AUS $ represent a 10-15% improvement on their bottom line.
They hold moderate debt, but it's healthy debt. With stable cash flow, good liquidity there is no short term concern about the ability to make repayments - CDD is far from insolvency, the balance sheet is just delicious and when you link it directly against the chart you will lick your lips.

It's hard for CDD to move north whilst there is still uncertainty about who will eventually fill the shoes of Michael Renshaw, but I believe a quality firm like Cardno will wait for the best CEO the market has to offer. I believe this will be happening in coming months and I believe this will be another value adding announcement.

Conclusion
CDD openly addressed concerns about the weak market for 2014 but remain very positive about the second half of 2015.
P.E of 7.11, MC of 500mil, 10yrs of historically strong support around $3(not even the GFC could break this), their largest backer investco topping up 1.6million shares at current prices increasing holding to 8.22%.
CDD has always achieved what it has set out to do, if they get their top 20 spot by 2020 (vision 20/20) they will need to be generating revenue of over 2billion dollars.
I'll back them to do this and I'll say once there, CDD will be trading around $14. The chart has it written all over it.

This is a spec buy from my opinion only, this is not financial advice, the market may deteriorate even further from here and my call might be way off. Invest on your own decisions.