MICHEL PIREU: Key red flags that suggest you could be sitting on a dud stock
Declining sales, falling gross margin percentages and lowering net income are typical tell-tale signs that all may not be well
What can go wrong with an investment? The short answer is pretty much anything. So anyone who fails to approach a stock purchase without first assessing the worst-case scenario is asking for trouble.
No-one likes to think about the pitfalls. Occasionally these disasters appear out of the blue, and there isn’t any way to see them coming. But by and large, that is not the case. There is usually more than one signal — red flags — that, had they been noticed, would have warned of the forthcoming disappointment. Unfortunately, there is no universal standard for identifying red flags. Detecting problems with an investment opportunity depends on the approach adopted. A red flag for one investor may not be a red flag for another...
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