Should you buy companies torpedoed in a downgrade?

Financial Journalist
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I mostly like watching the market hammer companies that downgrade earnings guidance. Some overhyped stocks deserve a thumping; others fall too far, creating opportunity. The downgrades are a brutal reminder that earnings ultimately drive valuations.

Link Administration Holdings (LNK), Costa Group Holdings (CGC), Appen (APX), Reliance Worldwide Corporation (RWC) and Flight Centre Travel Group (FLT) headline a list of companies lowering profit guidance this quarter or missing market expectations on guidance. The downgrade deluge has led to price falls of 20% or more in some stocks.

Often, stocks fall by double-digit amounts on the downgrade, then have a hefty fall the next day as investors, including those in different time zones, digest the news.

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