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Ask This Question Before You Sell a Stock on Disappointing Earnings

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This earnings season has been brutal, leaving investors of stocks including Netflix to pay the price. 

Before you hit your 'sell button' when one of your favorite companies misses Wall Street's moving target, Chris Versace, co-portfolio manager of Action Alerts PLUS, has a word of advice. 

Take a breathe and ask yourself a simple question: What has fundamentally changed from your original thesis? 

Find out how Versace and co-portfolio manager Bob Lang are approaching this earnings season and reports from Ford  (F) - Get Ford Motor Company Report, Alphabet  (GOOGL) - Get Alphabet Inc. Report, Apple  (AAPL) - Get Apple Inc. Report, Amazon  (AMZN) - Get Inc. Report and more here. 


CHRIS VERSACE: When a stock implodes after earnings, you really have to sit back and ask a question. What has fundamentally changed from your original investment thesis? If it has changed, where all of a sudden what you thought was growing is no longer growing, what new product was coming is no longer coming, whatever it is, you have to take stock of that. And if it's a significant drop in a stock, I would tend to wait a little bit, let the stock recover, and then work your way out of it.

On the other hand, if the thesis is intact, everything is firing, and it's a slight misperception, or even a very minuscule miss relative to expectations, at times, we see some stocks miss earnings by a penny, and they're down 5%, 10% 15%. As long as the thesis is intact, that is an opportunity that you have to recognize and just go for it. Again, the thesis has to be intact.

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