If a particular ASX share falls horribly but a professional investor is sticking with it, then it might be worth taking note.
That's because the stock is now selling for cheap, allowing for a lower entry point, yet there is sufficient potential in the business to provide positive returns in the long run.
That's a pretty good position to be in for an investor willing to buy in right now.
This week we saw two examples in Glenmore Asset Management portfolio manager Robert Gregory's memo to clients.
Court case not 'a material negative'
The fund watched in horror as the share price for Strandline Resources Ltd (ASX: STA) plummeted 18.5% in December.
Gregory explained that this was due to some legal troubles that the resources company is facing.
"Late in the month, Strandline disclosed a contractor [TMM Group, a subsidiary of ASX-listed Macmahon Holdings Ltd (ASX: MAH)] had initiated legal proceedings in the Supreme Court of Western Australia."
The contractor is accusing Strandline of owing it $13.5 million.
"In the ASX release, Strandline said it will defend the matter vigorously and bring its own counterclaims against TMM."
There is no panic about the stock price fall, as far as Gregory is concerned.
"Given the size of the claim, we do not see it as a material negative at this point," he said.
"In more positive news, Strandline announced its flagship project, Coburn (WA), made its first shipment of heavy mineral concentrate (HMC) of value of ~$7 million, during the month."
Despite the terrible month, the Strandline share price is still 13.64% higher than a year ago.
Lithium down, but business still going strong
Mineral Resources Ltd (ASX: MIN) faced no such legal issues but still saw the stock price tumble 11.7% in December.
Gregory noted that, following a year of lithium prices doubling, the commodity cooled off 10% last month.
"Whilst Mineral Resources is not a pure-play lithium company, it does have material exposure to the commodity, so it was not surprising the decline had an impact on MIN's short term stock price."
There are no alarm bells going off for Gregory about Mineral Resources' decline either.
In fact, he reckons if it weren't for the iron ore price, the stock could have plunged even further.
"Mineral Resources' other key commodity exposure, iron ore, fared better, rising +14.1% in the month."
Some positive news also came out of December, in the form of an acquisition.
"Mineral Resources announced a scrip-based takeover offer for WA-based gas company Norwest Energy NL (ASX: NWE)."
Gregory noted the former already owns about 20% of the latter's shares, but access to easier funding as a part of Min Resources would allow considerable advantages for Norwest.
"The logic of moving to 100% ownership being it would allow Norwest's high quality gas assets to be developed more easily and faster."
