Why you think there are more high StockRank profit warnings than there really are

On Thursday evening DX Group was ranked amongst the top 1% of stocks in the UK according to the Stockopedia StockRanks. Unfortunately for holders, the company announced a profit warning on Friday morning and was brutally punished by the market. It fell 73% from 85p to 23p on the day. As usual, Paul Scott was very quick off the mark with his analysis in a post which has drawn a wave of more than 60 responses from the community since.Catching up this morning I discovered many, often rather angry, comments about the fact that DX Group had a 99 StockRank before the profit warning. For those who don’t know, the StockRanks grade all UK and international shares from zero (worst) to 100 (best) across a range of fundamental and technical factors, so when one of the top rated stocks falls out of bed it tends to cause a stir. As one of the architects of the system, some of these comments were pointed in my personal direction, so I feel I have a duty to respond. While I’ve written extensively on how to think about high StockRank stocks before, there was one comment in particular...