As expected, the ASX was lower this morning.
The S&P/ASX200 dropped sharply by 165.90 points or 2.26% to 7,166.30, despite crossing above its 125-day moving average.
The bottom-performing stocks in this index were Domino’s Pizza Enterprises Limited down 5.93% and Virgin Money UK PLC (LSE:VMUK) down 5.45%.
The index has lost 2.40% for the last five days but has gained 8.79% over the last year to date.
Earlier, the CBA had suffered a massive 4.2% intraday fall and the other major banks are down 2.7%.
Should investors buy into mining
As we always do on a Friday, we caught up with Wealth Within analyst and founder Dale Gillham to get his take on the investment landscape.
This week he talks about investing in mining stocks.
“In mid-July, iron ore was $228 but then China announced it was cutting steel output and by September 22 iron ore fell by more than 50% to be trading just under $100. Over the same period, Australia’s big miners fell away with BHP and RIO down around 30%, while FMG is down over 40%. Given this, many investors are asking whether they should be buying the big miners right now.
“Investors like to chase a bargain and when a good stock has fallen heavily, it can present a good opportunity to enter while it is undervalued.
"That said, investors tend to buy too early only to find they have caught a falling knife, as they watch the price of a cheap stock continue to fall. Given that BHP, RIO and FMG are all affected by the iron ore price, the first question investors need to ask is whether the price of iron ore has stopped falling, which I don’t believe is the case.
“The second question investors need to ask is whether the price of the stock has also stopped falling. Unfortunately, many investors get this wrong because they look at how far price has fallen compared to a few weeks or months ago to determine if the stock is a bargain.
“Take RIO, for example, it was $137 at the end of July and last week it had fallen to $94, with some investors buying into the stock believing it was cheap, pushing the price up to around $100 this week. But has RIO stopped falling? Maybe, but we can’t confirm this just yet.
“We are also yet to confirm if iron ore has stopped falling, as it is possible it could fall another 20 per cent in the coming weeks and/or months, which is likely to impact the share price of BHP, RIO and FMG further. That said, I believe we have already seen the price of these stocks fall 80 to 90% of what the total impact will end up being.
“Given this, while investors should start to get excited about the impending opportunity, it is still way too early to be buying these stocks. The time to take advantage of these lower prices will most likely be in November but this will only be confirmed when we know they have stopped falling.”
On the small cap front
There were quite a number of annual reports released today, before the deadline, which could explain why some companies are having a good day on no news.
Bardoc Gold Ltd (ASX:BDC) is up 8.7% with CEO Robert Ryan leaving the fold, following the company’s strategic review.
Other small caps of note include:
- AVZ +2.99%
- AQI +2.22%
- ATX +4.76%
- AND +3.23%
- ARO +25%
- CAV +16.67%
- CLE +20%
- DNK +2.3%
- GTR +3.7%
- GBR +3.23%
- HRZ +5%
- KWR +7.14%
- LEG +2.63%
- LIN +3.12%
- LIT +2.08%
- LRS +4.65%
- LOT +6.38%
- MKG +7.47%
- MEU +4.35%
- MM8 +6.67%
- MEI +2.08%
- MGV +5%
- NXM +9.38%
- OAR +4%
- OPN +3.23%
- PNX +8.33%
- PEN +7.14%
- RTG +4.55%
- SVL +2.7%
- SHP +6.25%
- STK +3.51%
- STM +4.55%
- TMR +5.56%
- TEG +2.63%
- TSC +10%
- VAL +6.25%
- WKT +2.5%