Santos Limited

Santos (STO) - $5.77: We've seen what can happen to companies when profit warnings are released and fall foul of market expectations – just ask Computershare. Last week Santos surprised everyone with one of its own. It announced an expected drop in full-year net profit of 10% thanks to a $40m depletion charge arising from a downgrade of its oil and gas reserves. The market panicked and the shares fell 6% on the day. The share price is now down 5% since issue 94 (Long Term Buy - $6.05). Rather than fall over the cliff with the rest of the lemmings and sell, our belief in MD, Ellice-Flint encourages us to hang on. Having ordered the reserve review, at least now he knows exactly where the company stands and with dividends not in jeopardy, we like buying quality stocks cheaper. That's why we're buying 700 more for the growth portfolio. LONG TERM BUY.