A prominent television business channel scoffs at the thought of asking a doctor for stock advice. That is the provocation for this post. Doctors may not be commerce majors, but diagnosis is right up their collective street. A physician is trained to smell impending disease when a patient feels fit and fine.
It is not enough for executives to proclaim that your stocks in their care have done well. It is Freddie (NYSE: FRE) today. Who knows if your Fannie (NYSE: FNM) could be in pain tomorrow? Here are five reliable stethoscopes to find out which stock beats to skip:
1. Sales grow faster than profits. The marketing guys must be on an ego binge at your cost. Reach safe harbor before they pull the plug on your portfolio.
2. Fixed costs and interests eat more of Gross Margin than they used to. The arteries of such a business seem to have hardened. You may want to consider abandoning the ship before she sinks.
3. Slow-moving items lurk in corners of warehouses. This is an especially tough nut to crack since executives will duck direct answers if you do not persist. Check out the hull before you set sail.
4. Debtors dilute dividends. There is a mouse in your financial larder. Even a buddy bank of the Fed needs to be paid on the button. Fumigate the holds of your ship.
5. The research and development pipeline has run dry. Competitors will get the throat of such a company, even if customers let it survive. Look for other waters to keep the breeze under your stock sail.
Top stock investing is like astrology. Hedge your bets by all means, but keep your senses skinned for that patient who could cost you your practice.
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