I agree that the drying up of buy-side depth and the single...

I agree that the drying up of buy-side depth and the single panic seller was the primary cause of the sell-off, but I also think that the Dow futures, which were looking pretty grim on Friday afternoon, also contributed to a late afternoon panic sell-off on a number of smaller ASX stocks, including CND. (I also had a quick look on Friday for any news article that might have contributed to the sell of, but couldn't find any).

All of the analysts who cover CND (JP Morgan, Wilson HTM, and Macqauarie) have recently put out similar reports, saying that the FY08 results will come in roughly in line with FY07 (basically, the slight fall in earnings expected in the December half on the back of Lloyd Morgan will be compensated in the June half, resulting in a flat full year result).

Analysts are also predicting that CND's dividend this year will be 19c (same as last year).

Furthermore, analysts are predicting a return to strong growth for FY09 and beyond. However, while analysts acknowledge that CND has strong fundamentals (including low levels of debt and plenty of cashflow), and a growth outlook, they don't expect CND to return to previous trading levels until the market is satisfied that the Lloyd Morgan problem has been resolved.

If recent analyst forecasts are in the ball park, Friday's closing price has CND trading on a FY08 earnings multiple of around 8.2 and paying a massive 9.5% dividend. On this basis, and given CND's strong fundamentals, I thought Friday's price was a great buy and I doubled my holding in CND.

I expect CND to make a gentle price recovery over the next couple of weeks as bargain (and yield) hunters move in ahead of the dec half results. However, given the current fear-factor in the global financial markets and the question mark surrounding Lloyd Morgan, I'm not expecting any major price recovery until after the December half results are released in late Feb.

Assuming there is no wider ASX market meltdown or profit downgrade, and assuming there are generally positive outlook statements given, I would expect CND to recover to around $2.80 following the half year results, and to further climb to around $3.40 following the FY08 full year results. While FY08 may end up being be a soft year for stocks in general (because of the mild US recession), FY09 will probably be a recovery year for the global economy, and $4 for CND within 12-14 months is a distinct possibility.

We should also keep in mind that in times of global uncertainty, investors tend to migrate to high yielding stocks with low PE's, and low levels of debt.

Summing up, I think there is a realistic chance of a 100% gain with CND for investors brave enough to ride out the current choppy period and patient enough to hold for 12 months or so.