Protect yourself from profit warnings

Protect yourself from profit warnings

When a profit warning causes a company’s shares to tank, there is always the temptation to view the event as a buying opportunity. That’s especially true for investors already committed to the investment merits of a company, who will in general be more susceptible to view a disappointment as a short-term, one-off setback rather than a more entrenched long-term issue. Behavioural scientists have even coined a term for this “look-on-the-bright-side” trait: confirmation bias.

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