(BFM Stock Exchange) – Strong stock market falls sometimes encourage you to position themselves on a title, investors judging that there is an entry point. But these very pronounced declines can be announced by structural difficulties for the company in question.

Should we buy an action, when it has experienced an important dive on a single session? The stock market adage – which does not constitute a brass rule – wants “one does not catch up with a falling knife”.

However, a sharp decline can obviously constitute an entry point, encouraging investors to position themselves on the action. In particular the small carriers.

In November, the Financial Markets Authority (AMF) had published a very instructive study on violent stock market dropouts on CAC 40, examining falls of more than 10% on a session.

She noted that the scholars were tended to buy a title when he unscrewed. “We observe that at the time of the stock market dropouts of 2023, the management companies adopted a clearly seller position, while private investors were generally buying during the fall in securities,” wrote the authority. “On average, compared to the daily amounts treated during the 15 days preceding the dropout, the total amounts exchanged by the retail (individuals, editor’s note) double the day of the shock,” she also noted.

Recent examples not engaging

However, the authority was nuancing this observation by noting that these private investors then had shared reactions during the fifteen days following the dropout, retaining their positions in certain cases while they were in the sale in other cases.

Several recent examples on CAC 40 encourage, in any case, caution on the attitude to adopt after falls of more than 10%. In March 2024, Kering saw his action unscrewing 11.9% on a session after a warning on Gucci sales. The title fell at 375.20 euros. It is currently evolving around 230 euros and therefore lost almost 40%.

Stellantis had lost 10.1% on the session of April 30, 2024. The financial director (who then left the company) Natalie Knight then warned analysts that the group would experience a sharp drop in its current operating margin in the first half and had indicated that the European market was difficult.

The action had closed at 20.88 euros. It is now worth 12.45 euros (-40.4%). The car manufacturer then chained the reverse, with a heavy warning on results in the fall, which ended up succeeding in the Director General, Carlos Tavares.

Finally Edenred had plunged 13.5%, at the end of July, after the publication of his half -yearly results falling at 36.29 euros. The market was then concerned with a slowdown in its high growth. The title continued to suffer later.

The action unscrewed 14.7% on the only session of October 24, after the publication of its third quarter activity. The company then disappointed on its growth and warned of a regulatory risk in Italy. The action is currently worth around 31 euros.

A revealer

Obviously, it should be kept in mind that past performance does not prejudge those future. And that counterexamples can exist, especially if performance is appreciated in the medium term.

Siemens Energy, ex-Filiale of Siemens specializing in energy, had plunged 37.3% on a single session on June 23, 2023 due to failures on components of wind turbines which had forced him to abandon his annual profitability objective. However, last year, the German group signed the best performance of the Stoxx Europe 600, with a gigantic leap of 320%. Since the fall of June 2023, its course has been multiplied by three.

Closer to us, Sanofi had won almost 19% on a session in October 2023, falling at 81.4 euros. The title has since redone a good part of its losses, currently evolving at 96 euros.

As for Kering, Stellantis and Edenred their 2024 stock market preformances do not prevent some analysts from being purchased on the file, which is the case, for example, of Deutsche Bank for the first, and Bank of America for the second. In all cases, it is necessary to analyze each file well and to be vigilant.

Marc Giraud, manager and co-founder at HMG Finance calls for distrust, in a context where stock market dropouts are increasing.

“For 10 years there has been a strong increase in the drop phenomenon of more than 10% over a single day” on the CAC 40, recalled the market expert on News Bulletin 247, on January 8. The expert noted that 9 CAC 40 groups accused a fall of such magnitude in 2023, against 3 values ​​per year on average between 2013 and 2018.

“I believe that a decrease of more than 10% often acts as a revealer of more serious problems that will manifest itself, to distill itself more seriously over time,” concluded the manager.

In his study, the AMF noted, for its part, that the violent falls were not followed by rebounds in the short term (ten days after the fall). “Significantly downward variations in France after 2018 are marked by an absence of prices reversion in the days following dropping out,” wrote authority. Worse, “in the case of the years 2018, 2019, 2022 and 2023, the post-pricing prices seem to be installed to last”, she underlined in November.

In the year 2023, the AMF observed that one value (Stmicroelectronics) in eight had seen its course return to a price equal to or greater than that preceding the dropout of more than 10% over a period of 40 days after the fall. The authority suggested that the open sellers could intervene after a fall, and thus promote the persistence of the drop in the titles concerned in the medium term.

The AMF underlined in passing that the multiplication of violent corrections observed on the CAC 40 were not specific to the Parisian place. This phenomenon is also observed in Europe (especially on the Dax) as well as in the United States.