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8 Feb 2017 (TheAge,SMH) – Growth stock investors jumpy as profit season under way

[COMMENT: Another very informative and great article from Marcus Padley.]

(8 February 2017, The Age, MONEY supplement p8, Marcus Padley)

‘After a relentless raft of profit warnings last week the alarm bells are ringing.’

‘First there was Aconex (ACX) down 45 per cent on Monday. Virtus (VRT) down 17 per cent on Tuesday. Then Ozforex (OFX) and GBST (GBT) down about 20 per cent on Wednesday. It’s like being on a battlefield during an artillery barrage.  And they are not small stocks. Aconex was a $2 billion market capitalisation stock. It lost $900,000 worth of shareholder value in one day. These profit warnings follow similar shock drops in Brambles (BXB), Bellamys (BAL), Sirtex (SRX), Servcorp (SRV), Pro-Pac Packaging (PPG), Oroton (ORL), Mayne Pharma (MYX), iSentia (ISD), Mantra (MTR), and Vocus Communications (VOC), TPG Telecom (TPM).

‘The ACX guidance downgrade saw revenue guidance down from the $172 million-$180 million range to…’ <snipped…>

‘… the market can’t value the stock, it is an “earnings tomorrow” story, and without knowing where the floor is the sellers take no prisoners.’ <snipped…>

‘…And the brokers liked it. One major broker had an OVERWEIGHT recommendation published the day before the downgrade, with a $9.30 target price. It was $3.10 the next day. They quoted an 80 per cent chance of it being higher in the next 30 days. …’ <snipped…>

‘There are a few points that arise:’

‘1. If analysts at the big brokers, who research a stock in depth, visit the company,…’ <snipped…>

‘2. When the “value” of a stock is unknown, which is typical of a…’ <snipped…>

‘3. With continuous disclosure rules in place…’ <snipped…>

‘4. If you are looking to buy stocks for their dividends or growth stocks without taking a big risk, why not wait for the results to get out of the way first. Why take the risk, and if the results are OK, then buy for the dividend or for growth, after the announcement, rather than take the risk over the results.’

Read the full story at SMH.com.au

 

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