[[Start here]] → [[What works in stocks?|what works]] → [[maintain your discipline|discipline]] → [[what to do on a profit warning|profit warnings]] → quality stocks --- We conducted extensive research on the [price behaviour of stocks after profit warnings](https://www.stockopedia.com/books/profit-warnings/).[^2] The study was based on 245 profit warnings over a number of years. The conclusions were clear cut. The chart below shows the 1 year price performance (vertical axis) after the initial profit warning fall versus the Quality rank of each stock: ![[sell all but the highest quality stocks on a profit warning.png]] - The average stock continues to fall another 10%. - The only class of stocks with a high probability of recovering are the highest Quality shares. *(A useful rule of thumb is for a Stockopedia Quality Rank > 75)* There is no guarantee, and the correlation is not strong, but the green trend line shows that higher quality shares tend to be more likely to recover in price. There is no such correlation for higher Value shares nor Momentum shares. [^2]: Stockopedia.com - [The Profit Warning Survival Guide](https://www.stockopedia.com/books/profit-warnings/)