Shares in Codan Limited (ASX: CDA) opened poorly on Friday and now trade less than 2% down at $8.99 apiece.
Codan shareholders have been walking on a saw's edge these past 3 months with shares descending from highs of $10.44 in November to now trade near 52-week lows.
Zooming out, the picture is even more painful for Codan. Shares have faltered off 52-week highs of $19.33 back in June 2021 and there has been several drops of $2 in a day across that time.
Yet whilst most investors are feeling pessimistic, not all market pundits are as downbeat on Codan. Plus, shares have climbed 4% in the last week of trading, suggesting newfound support as market turbulence begins to settle in 2022. Could it be that Codan is set for a comeback this year? Let's take a look.
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Is Codan set to explode in 2022?
According to Simon Conn, portfolio manager at Investors Mutual Limited, that could very well be the case, should the market agree.
Speaking to an episode of Buy Hold Sell on Livewire, Conn noted that Codan is a stock that's "probably not well known by investors" although, the company "has a great management team, a good board and it dominates a niche".
In fact, Codan makes handheld metal detectors and other mining technologies, in addition to defence communications that are used by the military in combat.
It has exposure to the domestic security, NGO's, military defence, public safety, remote land management and commercial sectors, and was first incorporated in South Australia in 1959.
The portfolio manager explains that Codan has been outselling its competition for many years now, and have a global leadership position in the market.
Importantly for investors, the company reaffirmed its guidance for the first half in an update last month, according to Conn. Investors appeared somewhat galvanised by the results, and bought in at 52-week lows and drove the stock north in vertical fashion.
However, Codan has been caught up in the tech selloff that's ensued since December and hasn't been able to recover since. It is down 2% since January 4, but has regained strength recently and is now up 3% for the last month of trading.
Nevertheless, Conn and his team are excited about the company's balance sheet and growth prospects, especially considering it is such a mature entity.
"But again, a good management team, trades on 15 times [earnings], it's debt-free, which positions them for further acquisitions. And it's a business that we think can continue to grow", he said.
"Their other division is in the radio communications sector. They made some recent acquisitions in that area and they highlighted in their update last week that those businesses have tracked well and there's further acquisition opportunity for them to build out that portfolio in time", Conn added.
Although, the market has to agree with this sentiment, and with the S&P/ASX All Technology Index (ASX: XTX) plunging more than 15% so far in 2022, the pressure is on Codan to show up to the party.
Even still, valuation, financial health and a market leading position form the bulk of Conn's bullish thesis on Codan.
"We think it looks pretty attractively priced at these levels".
Codan share price snapshot
In the last 12 months, the Codan share price has lost over 24% and is now down 2% this year to date.
Over the last month of trading, shares have regained support and are now up 3%, and another 4% in the past week.
