It's safe to say that many investors' nerves are officially rattled following a rather inauspicious start to the new trading year.
The S&P 500 fell 5% during 2016's first four trading days, including 1%+ drops in three of the four sessions. That type of volatility will likely continue, although I don't believe it will be all to the downside.
The damage was even worse in the small- and micro-cap arenas. The Russell 2000 fell 6.3% during 2016's first four trading days, while the Russell Microcap index shed 6.6% and S&P SmallCap 600 lost 5.6%.
Investors typically jettison smaller stocks first in "panic" situations, and the carnage was even more serious in several individual small-caps (including some that I own). For instance:
Cresud Wilted on the Vine
Controversial Argentine farming firm Cresud (CRESY) gave back nearly 5% yesterday and was down some 13% for the year as of yesterday's close. But then, we're talking about a company from Argentina, so volatility isn't exactly surprising.
Pro-business reforms led by new Argentine President Mauricio Macri should ultimately boost CRESY's fortunes, but it will take time to reboot the Argentine economy (if that's even possible given years of bad policy).
Investors Hung Up on Vonage
Vonage (VG) fell by more than 6% yesterday, although it was up a bit today as of last check. I've had a great experience with VG so far as both a stockholder and business-services customer, so I plan to continue holding onto my stake.
Vonage's 48.2x trailing price-to-earnings ratio makes the stock a bit out of the ordinary for a self-proclaimed value investor like I am, but there are many ways to measure value.
Finish Line Lost the Race
Finish Line (FINL) fell 10% yesterday, but that wasn't all due to market's overall slump. The struggling retailer, which has recently appeared on some of my value-oriented screens and is a member of my Double Net Dividend portfolio, released crummy quarterly results on one of the worst days to do so.
CEO Glenn Lyon also announced his resignation, while FINL lowered earnings guidance and announced plans to close lots of stores over the next few years. Time will tell whether FINL is a deal at these prices -- or just a much-dreaded "value trap."
Investors Said: 'Goodbye, Ruby Tuesday'
Struggling restaurant chain Ruby Tuesday (RT) shed 13% during the year's first four sessions, and the company's enterprise value has fallen below $470 million even though the firm owns a lot of real estate.
Am I tempted? Yes, but I'm not ready to pounce.
Other Small-Caps Held Their Ground
Some smaller stocks have held up better than I would have expected.
For instance, restaurant chain Zoe's (ZOES) is one of my favorite chain restaurants and a company I'd very much like to own, but its valuation is still too high for me. The stock lost 6.4% over 2016's first four trading days, but I need to see shares give back several more points before I'll buy them.
Similarly, Farmland Partners (FPI) -- which owns more than 250 farms with more than 107,000 acres -- lost a mere 2% during 2016's first four sessions. I'll have more to say about this stock in a future column.
And last but not least, my nemesis Biglari Holdings (BH) was essentially flat over 2016's first four trading days.
Of course, Biglari -- whose holdings include the Steak 'n Shake chain and a 20% share of Cracker Barrel (CBRL) -- fell 20% in 2015 and 31% over the past two years. So, maybe the bleeding has simply stopped.
This asset-rich firm continues to trade at a deep discount, in my view primarily because the market deeply distrusts its management (a topic for another day).
And Remember, 2016 Won't Be Another 2008
Finally, as we nervously wait for 2016 to unfold, I'd like to remind investors that even if this is a bad year, 2016 won't be another 2008 -- just as 2008 wasn't a repeat of the market's 1987 crash.
Whatever we're about to encounter, it won't be the the same as any previous year's action. So, smart investors should avoid making such comparisons.