5 Red Flags To Check Before Investing: How to Spot Dangerous Stocks & Avoid Bad Deals скачать в хорошем качестве

5 Red Flags To Check Before Investing: How to Spot Dangerous Stocks & Avoid Bad Deals

Are you about to buy a stock? Stop and watch this first. In this video, we break down the 5 critical red flags you must investigate before investing your hard-earned money. Successful investing isn't just about picking winners; it is about avoiding the losers that can destroy your capital. While financial media often focuses on revenue growth and "hot" sectors, smart due diligence requires digging into the governance, cash flow, and operational health of a business. Whether you are a value investor or looking for growth, these warning signs will help you filter out dangerous companies and value traps. In this video, we cover: 🚩 Red Flag #1: Management Integrity & Governance Issues When you buy a share, you are becoming a co-owner with the promoter or management. If you cannot trust them, you shouldn't invest. We discuss why related party transactions are a major minefield—such as transferring assets to relatives or paying royalties to family-owned entities. We also look at excessive promoter salaries that are disconnected from company performance and frequent changes in the management team or auditors, which often suggest internal chaos or attempts to hide financial realities. 🚩 Red Flag #2: The Debt Trap High leverage is one of the fastest ways to bankruptcy. We explain why you must look at the Debt-to-Equity ratio and why rising debt levels—especially when sales are slowing—are a massive warning sign. A company might show rising earnings, but if it is fueled entirely by increasing debt that it cannot service through operating cash flow, it is a precarious investment. 🚩 Red Flag #3: The "Profit vs. Cash" Disconnect Did you know a company can show a profit on paper but still go bust? We dive into Operating Cash Flow (OCF). Consistently negative operating cash flow, even when net income is positive, is a major red flag. It suggests that the company isn't actually collecting cash from customers or is overspending to keep the lights on. We also discuss why you should track the Cash Conversion Cycle to see if money is getting tied up in inventory or receivables for too long. 🚩 Red Flag #4: Inventory & Receivables Anomalies If a company’s inventory is growing faster than its sales, watch out. This usually indicates that products aren't moving, which can lead to severe liquidity problems later. Similarly, we look at "Diworsification"—when a company aggressively acquires unrelated businesses (often at the whim of the CEO) rather than focusing on its core competence, destroying shareholder value in the process. 🚩 Red Flag #5: Valuation & Hype Beware of the "Whisper Stock" or the "Next Big Thing." Peter Lynch warns against companies touted as the next Amazon or IBM, as these "hot stocks" often fizzle out. We also discuss why you should check the Price-to-Earnings (P/E) ratio; a ratio significantly higher than the company's growth rate often implies the stock is overpriced and overdue for a correction. #Investing #StockMarket #DueDiligence #ValueInvesting #financialeducation