The stockmarket is officially in correction — but it’s not time to sell, analysts tell Stockhead.

In fact it might be an ideal time to snag a bargain.

That sentiment was backed by a positive start for Australian indicies this morning following a rebound in US markets overnight after a series of positive earnings results.

The Dow Jones regained 1.6 per cent after dropping 2.4 per cent on Thursday. The S&P 500 (up 1.8 per cent) and NASDAQ (up 3 per cent) also made up much of the ground they lost yesterday.

Thursday’s Wall Street sell-off pushed the ASX 200 into correction territory — dropping 2.8 per cent to 5664. That’s down more than 11 per cent since the end of August. A correction is a drop of at least 10 per cent.

The ASX Small Ords — a measure of small cap ASX stocks — is down almost 12 per cent in the same period. The small cap index fell 3 per cent or 78 points to 2562.

>> Scroll down for a list of ASX small caps that fell 10 per cent or more on Thursday

So what should small cap investors do?

Michael Glennon of Glennon Capital reckons it’s time to get the wallet out.

“There is volatility and short-term noise but it is a great opportunity to buy some stocks cheaper than what they were a few months ago,” Mr Glennon told Stockhead.

“[That’s] if you like the business and you’ve got some conviction and you know what you’re doing.”

Chris Robertson of Arthur Austin Advisory shares that view.

“While the broad small cap market return maybe poor, there is always return-generation potential that exists within the small cap sectors and individual companies,” Mr Robertson said.

“There is no need to avoid investing because the market is falling — just be more selective.

“At times like these focus on companies with proven management, good industry positions, strong cash flow and solid balance sheets – these are trading at lower prices and some bargains can be found.

“These companies can also typically withstand market turbulence better.”

Should I sell?

John Hannaford, founder and director of View Street Partners, says it’s not the time to be selling.

“I wouldn’t suggest selling. You would be selling into a very illiquid market and you’re going to take a loss to start with which doesn’t give you the best outcome,” Mr Hannaford said.

“The markets have gone down before and always tend to rebound.

“We’re likely to see governments around the world putting out reassuring statements and policies which will boost sentiment.

“It’s a good opportunity to get assets cheaper.”

Beware of IPOs

While it might be a good time for stock-picking, several analysts warned investors should be wary of Initial Public Offerings in the current market.

“I would be reluctant to be chasing IPOs,” said Robert Swarbrick of Tamim Asset Management.

“I think it’s going to be a lot harder to raise capital in the small cap space. Tread carefully — don’t go chasing the blue sky.”

Mr Hannaford said there was “very little happening on the IPO market” anyway — and some companies that had held off raising money due to fears of a trade war now found themselves in strife.

“Brokers have almost shut up shop,” he said.

“People who were raising money in the junior space decided to hold off, thinking they would come back and raise money before Christmas. But things have turned out to be a worse set of circumstances and now there is a mad scramble to get deals done.”

Bargain bin

Of the 1700 or so ASX stocks under $400 million, only 230 made gains today while 770 fell and another 700 sat it out.

The ASX Small Ords is still out-performing the ASX200 and All Ords indicies on a 12-month measure — but only just as this Yahoo Finance graph shows:

The Small Ords (green) has lost all its gains from the past year and is only just ahead of All Ords (blue) and ASX200 (red). Source: Yahoo Finance
The Small Ords (green) has lost all its gains from the past year and is only just ahead of All Ords (blue) and ASX200 (red). Source: Yahoo Finance

Compumedics (ASX:CMP) was among the big losers today after its much ballyhooed deal to sell its “Somfit” sleep-tracking device into China got derailed.

The stock rocketed 75 per cent to 72c at the time of the announcement — but today closed down 13 per cent at 34c.

Compumedics also moved to “rejuvenate” its board — today booting an 18-year veteran director at its annual shareholder meeting.

Elsewhere, Cobalt Blue (ASX:COB) plummeted after it told investors it would miss a deadline to take full ownership of its 70 per cent owned Thackaringa cobalt project.

Cobalt Blue fell 27 per cent to 22c by the close.

Cannabis stock Cann Group (ASX:CAN) slumped 11 per cent after telling investors it had signed a three-year research deal extension with CSIRO.

After two months of silence investors had been hoping to hear more about progress on Cann’s major building works at its Melbourne Airport project or any other commercial activities.

Here’s a table showing 100-or so ASX small cap stocks that lost at least 10 per cent today:

Swipe or scroll to reveal full table. Click headings to sort. Best viewed on a laptop

ASX code Company One-day price change Price Oct 25 Volume Market Cap
TKF TIKFORCE -0.333333333333 0.002 70k 669.1k
SHM SHRIRO HOLDINGS -0.272727272727 0.68 651k 88.9M
COB COBALT BLUE HOLD -0.266666666667 0.22 2M 34.8M
AD1 APPLYDIRECT -0.266666666667 0.022 16k 7.4M
SRO SHAREROOT -0.25 0.003 5M 5.3M
OEX OILEX -0.25 0.003 155k 9.1M
MNC METMINCO -0.25 0.003 245k 3.7M
DDD 3D RESOURCES -0.25 0.003 1M 3.5M
CCZ CASTILLO COPPER -0.242424242424 0.025 100k 19.1M
PEL PELICAN RESOURCE -0.222222222222 0.014 68k 6.5M
LI3 LITHIUM CONSOLID -0.2125 0.063 228k 7.2M
TRL TANGA RESOURCES -0.2 0.004 10M 6.1M
AGH ALTHEA GROUP HOL -0.191011235955 0.36 2M 90.5M
BXN BIOXYNE -0.184210526316 0.031 59k 24.3M
TTL TRANSCENDENCE TE -0.173913043478 0.019 3M 4.0M
TAS TASMAN RESOURCES -0.171428571429 0.058 2M 34.6M
VRS VERIS -0.166666666667 0.125 1M 54.4M
RXH REWARDLE HOLDING -0.166666666667 0.005 40k 2.0M
RGL RIVERSGOLD -0.166666666667 0.075 275k 7.5M
PKO PEAKO -0.166666666667 0.01 75k 864.2k
MZN MARINDI METALS L -0.166666666667 0.005 19M 10.7M
KLH KALIA -0.166666666667 0.005 500k 15.1M
DHR DARK HORSE RESOU -0.166666666667 0.005 6M 11.5M
ESE ESENSE-LAB -0.15873015873 0.053 2M 6.3M
SVA SIMAVITA-CDI -0.153846153846 0.033 18k 16.2M
AOU AUROCH MINERALS -0.151515151515 0.084 119k 9.8M
CCG COMMSCHOICE GROU -0.15 0.085 107k 10.9M
N27 NORTHERN COBALT -0.147826086957 0.098 75k 5.8M
KGM KALNORTH GOLD MI -0.142857142857 0.006 133k 6.3M
EVE EVE INVESTMENTS -0.142857142857 0.006 5M 14.7M
CTO CITIGOLD CORP -0.142857142857 0.006 250k 15.0M
CTM CENTAURUS METALS -0.142857142857 0.006 1M 16.1M
ALT ANALYTICA -0.142857142857 0.006 2M 23.4M
AR9 ARCHTIS -0.142857142857 0.15 98k 21.5M
ACB A-CAP RESOURCES -0.14 0.043 16k 43.6M
EDE EDEN INNOVATIONS -0.139534883721 0.074 12M 130.8M
WEL WINCHESTER ENERG -0.137931034483 0.025 177k 8.3M
POZ POZ MINERALS -0.137931034483 0.05 39k 10.4M
IHL IMPRESSION HEALT -0.136363636364 0.019 33M 7.6M
CVT COVATA -0.136363636364 0.019 75k 17.0M
IMU IMUGENE -0.130434782609 0.02 70M 83.0M
AO1 ASSETOWL -0.130434782609 0.02 34k 2.1M
CMP COMPUMEDICS -0.128205128205 0.34 226k 69.1M
VMC VENUS METALS COR -0.125 0.175 153k 17.4M
THX THUNDELARRA -0.125 0.014 300k 10.2M
MTH MITHRIL RESOURCE -0.125 0.007 2M 1.6M
MEI METEORIC RESOURC -0.125 0.014 6M 9.2M
KAS KASBAH RESOURCES -0.125 0.007 995k 8.4M
ATC ALTECH CHEMICAL -0.125 0.105 5M 68.7M
ADO ANTEO DIAGNOSTIC -0.125 0.014 11M 18.4M
IEQ INTL EQUITIES -0.125 0.035 361k 5.1M
DVL DORSAVI -0.125 0.07 64k 13.4M
GAS STATE GAS -0.121951219512 0.18 65k 27.6M
KPO KALINA POWER -0.12 0.022 134k 11.1M
4CE FORCE COMMODITIE -0.12 0.022 2M 10.6M
CXU CAULDRON ENERGY -0.117647058824 0.03 164k 11.2M
BGT BIO-GENE TECH -0.117647058824 0.15 289k 21.7M
ALY ALCHEMY RESOURCE -0.117647058824 0.015 100k 7.5M
14D 1414 DEGREES -0.116666666667 0.265 419k 51.7M
AYS AMAYSIM AUSTRALI -0.116379310345 1.025 612k 244.5M
NES NELSON RESOURCES -0.115384615385 0.115 10k 6.0M
CAN CANN GROUP -0.115079365079 2.23 653k 351.8M
5GN 5G NETWORKS/ -0.114583333333 0.425 274k 24.5M
HLX HELIX RESOURCES -0.114285714286 0.031 549k 14.9M
OIL OPTISCAN IMA -0.112676056338 0.063 499k 30.7M
KIS KING ISLAND SCHE -0.112244897959 0.087 347k 24.0M
MQR MARQUEE RESOURCE -0.111111111111 0.12 2k 5.8M
FDX FRONTIER DIAMOND -0.111111111111 0.04 695k 10.3M
BLT BENITEC BIOPHAR -0.111111111111 0.16 569k 46.3M
ZYB ZYBER HOLDINGS L -0.111111111111 0.008 1M 5.9M
RLC REEDY LAGOON -0.111111111111 0.008 556k 3.6M
RBR RBR GROUP -0.111111111111 0.008 2M 6.3M
FIN FIN RESOURCES -0.111111111111 0.016 1M 5.3M
CCE CARNEGIE CLEAN E -0.111111111111 0.008 3M 25.9M
HXG HEXAGON RESOURCE -0.107142857143 0.125 154k 40.8M
MEB MEDIBIO -0.105263157895 0.051 1M 11.5M
TNT TESSERENT -0.105263157895 0.068 16k 10.0M
SW1 SWIFT NETWORKS G -0.105263157895 0.255 251k 34.6M
LCT LIVING CELL TECH -0.104166666667 0.043 3M 27.4M
LSX LION SELECTION G -0.103448275862 0.26 12k 43.5M
PBT PRANA BIOTECHNOL -0.102040816327 0.044 272k 26.3M
TOM TOMIZONE -0.1 0.009 200k 4.3M
SWJ STONEWALL RESOUR -0.1 0.009 628k 31.7M
SDV SCIDEV -0.1 0.009 351k 6.4M
SAU SOUTHERN GOLD -0.1 0.18 26k 11.2M
RHY RHYTHM BIOSCIENC -0.1 0.18 453k 20.2M
MGP MANAGED ACCOUNTS -0.1 0.18 132k 59.7M
KYK KYCKR -0.1 0.09 235k 15.1M
ICQ ICAR ASIA -0.1 0.18 798k 76.5M
EQE EQUUS MINING -0.1 0.018 2M 17.0M
EGL ENVIRON GROUP -0.1 0.045 822k 10.9M
WMC WONHE MULTIMEDIA -0.1 0.027 100k 4.6M
LPI LITHIUM POWER IN -0.1 0.27 2M 78.8M

 

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.