Examine these 5 before you make any investment decision, since it is far better to be aware of some possible negative signs. Read more.
None of these factors guarantees anything, of course, and sometimes even the best stocks will decline in certain market conditions. But the five factors below should certainly be examined before you make any investment decision, since it is far better to at least be aware of some possible negative signs.Article contentWe do not like to give most short sellers, especially the short-and-distort crew of funds that attack Canadian companies with ugly and often incorrect reports .
A high short position can mean potential future buying, and it can mean a possible short squeeze. But it also means some investors are taking a big betThis advertisement has not loaded yet, but your article continues below.Sorry, this one requires some math, but investors should always look at receivables and inventory levels in relation to sales when considering a company.
Similarly, one needs to watch receivables. If they are growing faster than sales, it could mean your company is offering favourable payment terms in order to secure more sales, or, much worse, it is having trouble collecting on customer invoices.As growth investors, we will hardly ever be that interested when a company is reporting lower sales year over year. But in an inflationary environment, this becomes even more of a potential red flag.
Of course, cyclical companies have widely variable revenue growth, since they are price takers , so declining revenue is less useful as a red flag. But if you happen to find a tech, health-care, industrial, consumer or non-cyclical stock showing declining revenues, just skip it and look for something else.There are dozens of reasons an insider might sell so insider selling is never a perfect indicator.
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