The Russell 2000 Index officially reached bear market territory today. Another vicious selloff in the market Monday was especially hard-felt by investors in small-cap stocks. These lower-volume stocks tend to get the worst of it at times like these. They also are the places to make the most money for an eventual rebound.
Is now the time to be buying? After today, I think the answer is yes.
Take away the fear for a moment and you will realize nothing in the past two weeks has really changed. What exists today existed a month ago, a year ago or even dating back to the financial crisis of 2008. The risks for a double-dip recession have always been there. Strike enough fear in the hearts of consumers, and that fear becomes a self-fulfilling prophecy — but that doesn’t guarantee a double-dip will occur.
What we are seeing now is a crisis in confidence. When investors have no confidence, there are no buyers, or certainly fewer of them. The worries of the market certainly are justified. Washington does not exactly exude leadership on major issues, and Europe has many of the same problems that date back to the Middle Ages.
The volatility index touched levels not seen since March 2009. It is no coincidence that such a date was when stocks hit rock bottom. The same is likely to happen in the current environment. When you consider that we are in a far better place today than we were in the depths of the U.S. financial crisis, it should be relatively easy to be bullish on the market now. There are bargains aplenty.
My favorite place to shop at times like this is the small-cap space. These stocks tend to rebound quickly, making big profits for those willing to take the risk when fear is at its greatest. Now is one of those moments.
Here are three small-cap stocks to consider today:
The smartphone and tablet revolution is far from over. Forget about the fear over the economy and global debts, and instead think about making money on a small-cap stock poised to benefit from this tech explosion. Brightpoint Cellular (NASDAQ:CELL) is a $500 million market-cap stock after losing more than 10% of its value Monday.
This stock is a screaming buy at these levels. The company recently reported second-quarter earnings results that beat Wall Street estimates by 3 cents per share. Brightpoint has beaten expectations the past four quarters and is likely to do so again. Shares jumped to $9 per share after the report was released and closed at $9.41 last Wednesday.
With the stock down 20% in just three short days, I would swoop in and buy Brightpoint at these levels.