The S&P/ASX 200 Index (ASX:XJO) dropped 3% today.

Pessimism seems to have returned because the boss of the US Federal Reserve downplayed how fast the US economy could bounce back.

The ASX 200 was a sea of red

There was a lot of red on the ASX today. There were two key industries that the market really punished, banks and travel companies.

The Commonwealth Bank of Australia (ASX: CBA) share price dropped 4.4%, the Westpac Banking Corp (ASX: WBC) share price dropped 6.1%, the Australia and New Zealand Banking Group (ASX: ANZ) share price declined 6.2% and the National Australia Bank Ltd (ASX: NAB) share price went down 5.4%.  

Looking at ASX 200 travel shares, the Webjet Limited (ASX: WEB) share price plunged 10.1%, the Flight Centre Travel Group Ltd (ASX: FLT) share price went down 10.4% and the Corporate Travel Management Ltd (ASX: CTD) share price declined 7.7%.

JB Hi-Fi Limited (ASX: JBH) fails to impress

The ASX 200 retailer revealed a trading update today. It was impressive, but the JB Hi-Fi share price still fell by more than 4%.

In the second half of FY20 to date, JB Hi-Fi Australia sales grew by 20%, JB Hi-Fi New Zealand sales dropped 19.3% and The Good Guys sales rose by 23.5%.

The New Zealand sales were impacted by the closure of stores due to restrictions.

The ASX 200 company is now expecting net profit to be in the range of $300 million to $305 million. This would be an increase of 20% to 22%. The profit growth includes an estimated impairment of New Zealand assets of around $25 million after tax.

IPH Ltd (ASX: IPH) share price rises again

The IPH share price went up another 4.3% today. Yesterday the ASX 200 IP company announced an acquisition called Baldwins Intellectual Property for $7.4 million.

It’s based in New Zealand and was established in 1896. Baldwins’ FY20 earnings before interest, tax, depreciation and amortisation (EBITDA) after normalisation adjustments for partner salaries was approximately NZ$2 million.

Clients include large multi national businesses, universities, government agencies, start-ups and individual inventors.

More reading

• These ASX 200 stocks just got downgraded by top brokers
• 3 of the best ASX 200 blue chip shares to buy today
• Why the Webjet share price isn’t a bargain buy
• These ASX shares are the best way to invest overseas
• What today’s ASX 200 selloff tells me

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Corporate Travel Management Limited and Webjet Ltd. The Motley Fool Australia has recommended Flight Centre Travel Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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I think that having a little exposure to small cap shares can be a good thing for a portfolio if your risk profile allows it.

After all, if you can identify the next Afterpay Ltd (ASX: APT) when it is still only a small cap, you could generate mouth-watering returns.

With that in mind, here are three small cap ASX shares which I think are worth watching closely:

Bigtincan Holdings Ltd (ASX: BTH)

Bigtincan is a provider of enterprise mobility software to sales and service organisations. This software has been designed to increase sales win rates, reduce costs, and improve customer satisfaction. This is achieved through improved mobile worker productivity. Demand for Bigtincan Hub has been growing very strongly over the last couple of years and continues to this day. At the end of April the company revealed that it remains on course to achieve its 30% to 40% organic revenue growth target in FY 2020.

Volpara Health Technologies Ltd (ASX: VHT)

Another small cap ASX share to watch is Volpara Health Technologies. It offers cost-effective, mission-critical software that help radiologists deliver the highest-quality breast imaging services. Its software also leverages artificial intelligence imaging algorithms which assist with the early detection of breast cancer. At the end of FY 2020 its annual recurring revenue was up 172% year on year to NZ$18 million. This compares to its estimated US$750 million ARR opportunity in breast cancer screening.

Whispir (ASX: WSP)

A final small cap ASX share to watch right now is Whispir. It is a software-as-a-service communications workflow platform provider. Whispir’s intelligent and powerful workflows aim to revolutionise customer engagement, business resilience, and operational communications. Demand has been increasing very strongly during the pandemic and looks likely to lead to a strong full year result in August. I’m confident there will be more of the same in FY 2021 and beyond.

More reading

• 3 great shares to buy now if you’re an ASX 200 investor in your 20s
• EML Payments and these ASX mid cap shares could be destined for big things
• 3 small cap ASX tech shares that could be stars of the future
• Sezzle Inc shares and 2 other small cap ASX techs surge higher today
• 2 exciting small cap ASX shares that could have big futures

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of AFTERPAY T FPO, BIGTINCAN FPO, VOLPARA FPO NZ, and Whispir Ltd. The Motley Fool Australia has recommended BIGTINCAN FPO, VOLPARA FPO NZ, and Whispir Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Our market went into a freefall on Thursday with ASX big bank stocks leading the tumble. But these aren’t the only stocks to come under pressure as leading brokers downgraded two others to “sell”.

The S&P/ASX 200 Index (Index:^AXJO) fell 3.1% as it slipped below the psychologically important 6,000 mark with every sector dropping into negative territory.

We could see a few more days of weakness given the market’s big rebound from its COVID-19 low, but I don’t see the ASX 200 dropping back into a bear market.

While investors could see the weakness as a buying opportunity, brokers think you should be avoiding these two ASX stocks.

Cold chill from US mortgage business

The first is share registry services group Computershare Limited (ASX: CPU) as Citigroup downgraded its recommendation on the stock to “sell” from “neutral”.

“Our Deep Dive into CPU’s second largest business (US mortgage servicing) highlights several near-term challenges, all the more so if, as we expect, refi picks up again,” said Citigroup.

“There is the allure of potential positives down the track, but these are of uncertain size and likely some time away.”

Negatives outweigh positives

The positives the broker is referring to is earn one-off fees and the potential for higher margin sub-servicing work on non-performing loans. Around 8.5% of US mortgages are on a loan holiday.

But the upside may not eventuate until the second half of FY21 at the earliest and Citi pointed out that the tailwinds are hard to quantify.

In the meantime, revenue growth from Computershare’s US mortgage servicing division is expected to slow from around 20% CAGR over the last four years to about 6%.

The Computershare share price crashed 8.1% to $12.88 today. Citi’s price target on the stock is $12 a share.

In a hole

Another stock that took a hit from a broker downgrade was the South32 Ltd (ASX: S32) share price.

The stock lost 4.4% to $2.19 after Macquarie Group Ltd (ASX: MQG) lowed its rating on the miner to “underperform” from “neutral”.

The broker believes the downside risks to South32 is intensifying with most of its key commodities trading under Macquarie’s forecasts.

Earnings disappointment to come?

“The downside risk is headlined by hard coking coal which is trading 26% and 33% below our FY21 and FY22 estimates, respectively,” said the broker.

“Most other commodities and operating currencies are also trading well below our forecasts. Only manganese offers material upside risks to our FY21 assumptions.”

Macquarie’s 12-month price target on South32 is $1.90 a share.

More reading

• ASX 200 drops 3%, Webjet share price sinks
• These ASX shares are the best way to invest overseas
• Should I keep my stake at the current Monadelphous share price?
• All Technology Index sees stunning comeback
• Top brokers name 3 ASX 200 shares to buy today

Motley Fool contributor Brendon Lau owns shares of Macquarie Group Limited and South32 Ltd. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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