November has been difficult, but last Thursday was a particularly tough day for investors in some of Australia's up-and-coming small and mid-cap stocks. The 0.5% fall in the All Ordinaries Index resulted in a 2% fall for phone company Vita Group Limited (ASX: VTG), a 6% fall in OzForex Limited (ASX: OFX), a 40% plunge in Quickflix Ltd. (ASX: QFX) shares and a less severe 2.5% fall in Domino's Pizza Enterprises Ltd. (ASX: DMP) shares.
Of the four companies, only the 40% fall in the share price of Quickflix can be readily explained. Quickflix announced that it would be undertaking a renounceable entitlement issue of five new shares for every four shares held by eligible shareholders at an issue price of $0.003 per share. The deal will raise approximately $5.7 million to "support the company's strategic objectives and be applied to working capital as well as investment in content and marketing to achieve customer and revenue growth." The company has been a terrible performer for many years and I expect will continue to be so, if I were a shareholder I'd be concerned and not only due to the 60% fall over the last month!
The reason for the sharp fall in Vita Group and OzForex shares is more of a mystery. It could have something do with investors making way in their portfolios for Medibank shares, however I consider this unlikely. The most likely scenario, in my eyes, is that one or more brokers changed their view on the companies following recent investor presentations. The investment case for these two quality companies hasn't changed so I, as an investor, am not concerned even though they've fallen between 7% and 12% over the last month.
Finally, Domino's share price has fallen back to levels seen in early September but is still well ahead of where it started the year. The company is expanding rapidly by acquisitions and new store rollouts but analysts are heavily divided; either the company is very cheap or very expensive. I think the fall from $29.41 earlier this month to $25.08 on Friday represents a decent buying opportunity for long-term investors. Domino's extensive store network and loyal customer base ensures it will remain strong for years to come.
All in all however, the above analysis actually just demonstrates that in the absence of any decent news, investors really shouldn't worry about short-term price movements in great companies. This Foolish methodology to investing has resulted in some great results, even though short-term price movements might have been tough to swallow.
