Because it’s a knee jerk reaction to the Macquarie downgrade....

Because it’s a knee jerk reaction to the Macquarie downgrade. But if you read that report, it wasn’t actually all that negative. It noted weaker wholesale prices (which we already knew about). It wasn’t recommending a “sell”, it just downgraded from “outperform” to ”neutral” with a price target 15% in advance of where it is now.

I’ve certainly read more disturbing reports than that one! And yet the market throws up its hands and wipes 4% off the share price, really for no good reason. This after an already significant sell off which only makes sense if the numbers being reported next week are a good deal worse than what Macquarie is predicting (which is at the lower end of AGL’s actual guidance).

So long as we don’t miss that guidance, I think the stock could react well to the results announcement, as we’ve had such a significant sell off in the face of not much news at all.

Traders these days struggle to look more than 12 months ahead. They see a negative broker report, and hit the sell button. They don’t seem to care much about where a company will be in 5 years time. When such folks are keen to sell, we should oblige them.