Why I'd ignore the falling FTSE and buy these small-cap stocks today

If you're feeling spooked by the stock market's sharp slide, it's worth remembering that the FTSE 100 has only fallen by around 8% from its January peak.

Corrections such as this aren't uncommon after a long period of growth. The good news is that most major global economies still seem to be in good health, so corporate profits should remain stable.

In fact, the trigger for the falls seems to be strong US wage growth and the likelihood of rising interest rates. This could cause investors to shift cash from stocks to government bonds.

My view is that the current market sell-off isn't a serious concern. I don't plan to sell anything and may even buy more shares. After all, lower prices mean higher dividend yields, and cheaper valuations.

Unfairly cheap?

Shares in upmarket interior furnishings group Walker Greenbank (LSE: WGB) rose by 4% today, after the firm issued a solid year-end trading update. Sales are expected to have risen by 17.9% to £108.9m, thanks to "increased overseas sales" and "licensing momentum".

This good news will be a relief to shareholders. Walker Greenbank stock fell by more than 40% in November, after the group issued a profit warning. And in December, the company's Loughborough wallpaper factory was hit by a fire.

A return to growth?

Today's trading update indicates that full-year results should be in line with expectations. However, there still seem to be some concerns over UK brand sales, which fell by 6.1% excluding a recent acquisition.

Fortunately, growth elsewhere seems to be offsetting this slowdown. International sales rose by 23% last year, and UK sales including the Clarke & Clarke acquisition rose by 13.8%.

I think the UK weakness is something to watch, but not necessarily a cause for concern. The shares remain very cheap after today's news, trading on a forecast P/E of 9 for the year ahead, with a prospective yield of 3.6%. Given the group's strong balance sheet, I think this is too cheap. I'd be happy to buy today.

A wizard choice

Harry Potter publisher Bloomsbury Publishing (LSE: BMY) has lost 7% in Tuesday's market sell-off. Shares in the group have now fallen by 15% so far this year. Despite this, I don't think investors have much to worry about. Indeed, I'm quite tempted to add a few shares to my own portfolio.

Although the print publishing business is expected to face a long-term decline, Bloomsbury has so far avoided problems. A major reason for this is that it's the main publisher of the Harry Potter series.

Alongside this, the group's Adult division also publishes celebrity non-fiction books such as Tom Kerridge's Dopamine Diet, a recent number one bestseller. A third part of the business focuses on academic titles.

A blockbuster set of figures

It's not only Bloomsbury's books that make good reading. The group's accounts are also a pleasure to absorb, featuring strong cash generation, stable profit margins and a welcome lack of debt.

City brokers have become increasingly keen on this business, upgrading their earnings forecasts by almost 10% in 12 months. After today's falls, the shares trade on a forecast P/E of 12.5 with a prospective yield of 4.4%. In my view, that's cheap enough for this quality stock to deserve a closer look.

One stock that could climb 58%

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Roland Head has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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