Revenge is a dish best served cold, and selling a stock is no different. When a share you own endures a significant correction it's important to assess the reasons for this fall rather than make a snap judgement.
This is what we have tried to do in the case of Restaurant Group (RTN). Its shares have plummeted by close to a fifth on the back of a mediocre trading update yesterday.
The reason for the steep fall was the market darling's like-for-like sales growth of 1.5 per cent. That fell into management's guided range but clearly the market had been hoping it would hit the top end or even beat that benchmark.
In each of the calendar years from 2009 to 2014 the stock has comfortably outperformed the wider FTSE 250 index. It is perhaps this, as Peel Hunt analyst Nick Batram says, which has made it a "victim of its own success".
The broker moved the stock to a sell rating on the day of the trading update from add, but just a day later has returned it to hold. Mr Batram says it looks as though the group has "simply lost its ability to outperform in a difficult trading backdrop, as opposed to the wheels coming off".
Meanwhile, Berenberg has trimmed its profit and EPS expectations, but kept the company on a buy. Analyst Rob Chantry suggests the fundamentals are still in place, and that its growth prospects remain realistic, and can be funded organically.
