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For the average investor shrewd enough to navigate the perilous Canadian small-cap stock space, there are places of refuge amid the carnage.

While broader North American stock indexes are at or reasonably close to record highs, Canadian small-cap stocks remain gripped in a dizzying selloff comparable in severity to the financial crisis.

In a market dominated by resources, commodity weakness has dragged the S&P/TSX Venture composite index on a near-four-year slide to levels approaching the 2008 market depths.

"This latest selloff has been particularly brutal," said Steve Palmer, chief investment officer at AlphaNorth Asset Management.

And yet the selloff in Canadian small caps could get worse still, according to a number of fund managers who specialize in lesser-known Canadian names. But they also say that desperate sellers are trading down good companies, including those with little connection to resources.

There's no mystery what has caused the crash in the Canadian small-cap Venture index, of which the mining and energy sectors together account for 75 per cent.

The index peaked in March, 2011, which coincided with a downturn in the price of oil, followed by the beginning of gold's steady descent in August of that year.

Gold prices have since fallen by 42 per cent, crushing investor demand for the kind of junior mining exploration companies so prevalent on the Venture. In June, crude prices began their own descent amid global energy volatility, adding the Venture's junior energy names to the ranks of the suffering.

Total losses on the Venture so far: 70 per cent in three-and-a-half years. In the past two months alone, the index has lost 27 per cent, closing on Thursday at 751.54. The Venture is now less than a 10-per-cent dip away from breaching the low set in December, 2008, three months after the collapse of Lehman Brothers.

While fuelled by commodity prices, the crash has been all-consuming, with non-resource stocks being punished alike, said Fabrice Taylor, publisher of The President's Club newsletter. "It's very hard to be a non-resource small cap in Canada, and therefore tough to invest in them with any success. But highly lucrative if you know what you're doing."

It's a relatively small pool of players investing in Canadian small caps, Mr. Taylor said. And most of them are getting hit hard on their energy and mining positions. Still, those investors are reluctant to sell their beaten-down resource holdings into an illiquid market. "There is simply no liquidity – no buyers at pretty much any price," he said.

So instead, they sell off their non-core, non-resource holdings, trading down the shares of decent companies in differentiated sectors. Mr. Taylor named Empire Industries Ltd., an engineering company that makes hydrovac trucks and builds attractions for theme parks, as an example of a good stock battered indirectly by resource volatility. "There are some amazingly cheap stocks out there but they can and likely will get cheaper," he said.

In addition to steering clear of Canadian energy and mining small caps, one way to limit exposure to commodity weakness is by investing in companies with substantial cross-border revenues, said David Barr, chief investment officer at PenderFund Capital Management.

"Our Canadian names tend to have a very active presence in the U.S.," he said. CRH Medical Corp., a Vancouver-based company focused on hemorrhoid removal treatments, has increasing revenue growth and margins, an improving balance sheet, and "a dominant position in a niche market with a lot of runway," Mr. Barr said. "If you're increasing your risk profile and investing in concept stocks or unproven resource plays, that's where you can get really smoked in the small-cap market."

So why not avoid Canada altogether and focus instead on investing in U.S. small caps?

"The worst thing you can do is change your strategy near the bottom," Mr. Palmer said. "I watched guys do that in 2008 and they went out of business." He said he likes the Canadian small-cap technology space, naming Slyce Inc. – an imaging technology company – as an underappreciated stock.

"It's hard to identify the bottom, but we do know it's not going to go straight down to zero," he said. "There is going to be a countertrend rally, and the market can go up pretty darn fast."

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