As most ASX investors would be aware, the stock market has had a very lucrative year over 2024 so far. As it currently stands, the S&P/ASX 200 Index (ASX: XJO) has gained a significant 11.6% or so over the year thus far.
Thanks to this bullish environment, stocks like Commonwealth Bank of Australia (ASX: CBA) have climbed to new record highs.
Yet this rising ASX tide hasn't lifted all boats. In fact, some ASX shares are down by as much as 50% this year.
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Six ASX stocks down more than 50% in 2024
Take luxury e-commerce stock Cettire Ltd (ASX: CTT). Formerly a bit of a market darling, Cettire has had an awful 2024. The company has dropped over 57% from the $2.92 it started at back in January to the $1.24 share price it is commanding today.
It's a similar story for lithium stock Sayona Mining Ltd (ASX: SYA). Another former favourite of investors, Sayona has seen its share price collapse this year, going from 7 cents a share to the current 3.2 cents.
It's been even worse for graphite company Syrah Resources Ltd (ASX: SYR). The Syrah share price has tanked this year, falling from 66 cents in January to the current 23 cents. That's a drop worth 65%.
Syrah's story mirrors that of lithium hopeful Wildcat Resources Ltd (ASX: WC8). Wildcat has also suffered a 64.4% decline and is currently trading at just 24 cents.
A familiar tale for many investors would be the story of the Star Entertainment Group Ltd (ASX: SGR) share price. Star has had a horror year so far, with the company's shares losing more than 56% of their value since the end of 2023.
Imugene Ltd (ASX: IMU) is another former market darling that came back to earth this year. Imugene shares were asking 11 cents apiece back in early January. But today, those same shares are worth 64.5% less than that at just 3.9 cents each.
Time to buy?
Some investors, particularly those with a value investing bent, might be looking at these 'cheap' ASX shares and thinking that there might be a potential bargain to be found.
After all, if a company can stage a recovery from a drop of this magnitude, it can be very lucrative indeed. If a company drops 64.5%, for example, to 3.9 cents a share but then rises back to 8 cents, it would mean a 100% gain for investors buying today.
However, I would urge any investor entertaining these thoughts to exercise a very high degree of caution. If a company drops by more than 50% during such a bumper year for the markets, it means that investors are pricing in disaster.
For you to make money on a cheap ASX share in this situation, the markets need to be making a colossal oversight.
Investors are clearly anticipating that Star Entertainment, for example, will not return to its former glory days anytime soon. That's probably thanks to the company's ongoing losses and arguable failure to convince governments that it is suitable to operate its casinos.
The only way that one can make a conceivable profit with this company is to make a bet that this isn't the case.
Imugene is another example. Back in October, we discussed how Imugene had 2.3 quarters of funding left before its money runs dry. If you possess an in-depth knowledge of the pharmaceutical industry, you might be able to see a path forward.
But that path better be there because the market seems to be betting that it isn't. The only way you can win here is for the company to prove it wrong.
Foolish takeaway
When a share falls 50% or more in a good year for the markets, it's usually for a very good reason. Even if you think the market is wrong, it is a high-risk game to bet money on it. So, if you do think there is a case for any of these 'cheap' ASX shares to stage a recovery, you'd better make sure your thesis is watertight.
