Small-cap investors have been going grey over the first 80 days of the year, with the S&P/ASX Small Ordinaries (ASX: XSO) index down 8% so far in 2022.
Resources stocks held up that index, so most non-mining small-cap ASX shares have, in fact, been far more devastated than 8%.
But some experts argue the sell-off has been excessive for certain companies.
After all, the businesses themselves are no different to the end of last year. Much of the downturn in share price has been due to external factors, such as rising interest rates and war in Europe.
As such, Firetrail small companies portfolio manager Matthew Fist recently picked out 2 ASX shares — one growth and one value — that he would buy right now.
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Aussie company going gangbusters in the US
Ardent Leisure Group Ltd (ASX: ALG) has been a favourite among small-cap fund managers in the past year, and it remains so for Fist.
While the company is best known to Australians for operating big theme parks like Dreamworld on the Gold Coast, its big money spinner is actually in the US.
"Over 90% of the value of Ardent Leisure is now contained within its US chain of family entertainment centres, called Main Event," he told a Pinnacle webinar.
Main Event centres are huge warehouse-style indoor entertainment venues, with facilities like arcade games, ten-pin bowling and family restaurants all sitting under the same roof.
"They're far higher-returning and far better investments than traditional theme park assets."
Fist explained that when his team researched Main Event's biggest rival Dave & Buster's Entertainment Inc (NASDAQ: PLAY), they were shocked to find, for an equivalent site, the latter was reaping 40% more profit.
Fortunately for Ardent, prominent executive Gary Weiss realised this disparity three years before Firetrail and had bought a major stake in the company. He subsequently became chair and proceeded to restructure the Main Event business.
"Today these Main Event sites are actually outperforming Dave & Buster's."
Ardent shares closed down 1.51% on Tuesday at $1.305. They have lost about 3% since the start of the year.
ASX tech share its customers are addicted to
Megaport Ltd (ASX: MP1) shares have painfully lost 40% of their value since November.
As a virtual network provider, the company has been caught up in the general sell-off of growth and technology shares.
But it's gone too far, reckons Fist.
"There are some growth stocks that are high quality, and they've been unfairly sold off… Megaport is one such opportunity."
Fist explained how so much of computing in recent years has moved to the cloud, but the pipes between homes, businesses and data centres have not kept pace with the massive growth in traffic.
This is where Megaport comes in, enabling business clients to dial up or down their network capacity.
"Megaport is a global leader in what it does, and is a future-focused business," he said.
"If you become a Megaport customer, in the first year you're going to spend $1. Every single year after that, you increase the amount you spend with Megaport by 45%."
This metric told Fist's team that Megaport's services are invaluable to its customers.
"This makes Megaport, in our view, one of the highest quality companies on the ASX."
Megaport shares finished Tuesday 0.08% lower at $13.05.
