Good morning, it's Paul here.

It's not been a good start to the day. The council are cutting down a huge tree nearby, so I have the loud buzzing of chainsaws to contend with, making it difficult to concentrate. Plus there's been a profit warning from something in my portfolio - £CCT  So let's start with that. I've put the tickers of companies of interest (which I intend reporting on here) today into the article header. I've got plenty of time available today, so there's probably also scope for 1 or 2 reader requests, within the sectors that I cover.

Profit warnings just come with the territory for small caps. Hence why I don't let them bother me too much. It's a straightforward decision - is the company in a downward spiral (which would make an immediate selling of the shares the most sensible decision)? Or, are the problems being reported limited, and fixable? (in which case I would hold, or buy more). Plenty of companies do recover from profit warnings, hence why I think the concept of automatically selling after a profit warning is far too simplistic. Each situation is unique, so there will never be a one-size-fits-all strategy that is guaranteed to work.

The fact that a lot of people do sell instantly on profit warnings (often due to stop losses on spread bet accounts) can create some nice buying opportunities, when fundamentally sound companies are sold off far too aggressively on a profit warning which might have no bearing on the long-term prospects of the company.



Character (LON:CCT)

Share price: 357p (down 19.8% today)
No. shares: 21.1m
Market cap: £75.3m

(at the time of writing, I hold a long position in this share)

Trading update (profit warning) - I'm quite surprised that the market has reacted so negatively this morning to the latest update. The company had already told us here on 19 Sep 2017 that market conditions were challenging, and that a major customer (c.8% of total sales, estimated by one broker) Toys R Us, had filed for bankruptcy protection in USA & Canada.

Results for y/e 08/2017 - the company had already reported that results would be in line with expectations. This is reiterated today, as follows;

As reported in September, the business has had a solid finish to the 2017…

Unlock the rest of this Article in 15 seconds

or Unlock with your email