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In number, the September reporting season was balanced with respect to upside and downside earnings surprises and as expressed in share price movements.

 

Where an imbalance existed was in the disproportionately large size of share price declines for certain names that generated earnings disappointments. In quantum, upside reactions to positive earnings surprises were not as large.

 

In this regard, examples include CSL (down 17%), Reece (down 16%), James Hardie (down 26%), Woolworths (down 14%) and Domino’s Pizza (down 20%).

 

These companies could all be described loosely, at some stage in history, as ‘market darlings’. Some of the market declines recorded here are very recent reversals and others continue an ongoing share price malaise. The point to be made is that the disproportionate and negative share price reactions shown here reflect large overvaluations that have crept into these high multiple holdings over a long period of time. This also demonstrates that downside corrections are often ongoing and can span significant periods of time.

 

Finally, the disproportionately larger negative share price reactions of such companies compared to more moderate positive share price movements from current market performers suggests an overpriced market generally.