Time to buy long/short funds as earnings misses cause 'brutal' falls?

Fund buyers are increasing their exposure to absolute return equity funds to take advantage of sharp falls by companies which miss earnings estimates.

With stock markets having risen sharply last year to trade at, or near, record highs, managers are growing wary of valuations, especially as the penalties for disappointing earnings growth become ever more severe. This month Rolls Royce, Tate & Lyle and BAE fell by 10% or more – Rolls Royce dropped 16% in a single day – following either a profit warning or disappointing earnings. RBS sell-off Last week, Royal Bank of Scotland also tumbled 8% on the day its full-year results were published, as traders dumped the stock following worse than expected numbers from some of its divisions. ...