Is an early confession an opportunity to buy?

Financial journalist and commentator on 3AW and Sky Business
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With so many clouds over the global economy and the stock market, investors might have expected that the “confession season” preceding the February-March reporting season would be a very busy one.

In “confession season,” companies alert the market to changes in their profit guidance, or downturns in their business (usually both). What we saw over the recent season was further proof of how painful earnings downgrades can be, with some typically disastrous reactions in terms of share price.

Cooling global economic growth (in particular, from the main engine of global growth, China), a slumping domestic housing market, fears over Australian consumer spending and the fall-out from the financial services Royal Commission are just some of the cocktail of fears that are weighing on the stock market. The market is in no mood for unexpected (or repeat) profit downgrades: but companies’ continuous disclosure requirements make them necessary. It is a dire conundrum for companies whose business outlook is deteriorating.

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