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Friday, May 20, 2016

8 Signs of a Doomed Stock

Let me assume that you have been following my posts regularly, and are no longer swayed by stock market cacophony and 'expert tips' sent by SMS to your smart phone.

You have been doing due diligence and picking stocks based on solid research. Already some of them have moved higher since you bought them.

But there are these one or two exceptions that are refusing to move up. In fact, they may be gradually sliding down despite apparently good track records.

As a long-term investor, what are you supposed to do with the laggards? Hold on, and hope for prices to improve? Buy more as the stock is now available at a price lower than your 'buy price'? Get rid of it?

In a recent video posted at investopedia.com, you can check out more information about the '8 Signs of a Doomed Stock':

  1. Negative cash flows from operations
  2. High debt/equity ratio
  3. Low interest coverage ratio
  4. Sustained decline in price
  5. Profit warnings issued before or during quarterly results
  6. Large selling by owners/directors
  7. Resignations by key executives/managers
  8. Investigations by SEBI/Enforcement Directorate/Income Tax department
Any one of the above signs may not be enough to warrant selling. But several of these signs taken together is almost a guarantee that the stock's price will crash.

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