Profit warnings jump

Perhaps as a timely warning that despite the euphoria in the markets since the start of the year it isn't necessarily a one way ticket, yesterday there was a report that profit warnings from UK listed companies are at the highest level since 2008.

The number of UK stock market listed companies warning over profits leapt to 86 in the fourth quarter from 68 in the previous three months, taking the total to 287 or 15% in 2012 - the highest since the credit crunch and banking sector meltdown in 2008.

http://www.independent.co.uk/news/business/news/profit-warnings-jump-to-highest-level-since-height-of-financial-crisis-8468045.html

This isn't a disaster, but reminds us to be careful and perhaps suggests that looking for key words in company reports is just as relevant now as before. This is a system that the Naked Trader, Robbie Burns talks about in his book for finding both long and short opportunities which can be quite profitable. Companies announcing a profit warning often deliver more than one, a case in point being HMV before its demise, while companies that produce a good trading statement that exceed expectations will often deliver again and again. It is always worth looking out for positive or negative trading statements ahead of results as often the trend will continue in the direction of expectations, good or bad.