BALTIMORE ( Stockpickr) -- Is your portfolio waving red flags at you?
Too often, investors miss out on major red flags until it's too late -- but with the benefit of hindsight, a pattern of deteriorating financials typically isn't hard to spot in a stock that's taken a significant dive. The challenge, then, is to know what to look for before your shares get shellacked.
That's becoming even more important as we get further into the summer. Historically, summer is a period of comparatively poor equity market performance, a fact that we're now seeing this year with the end of 2013's primary uptrend in June. A weakening stock can get buoyed higher by indiscriminate buyers in a bull market, but that doesn't carry over when the bears come out. When the broad market's in a downtrend, deteriorating firms are all but guaranteed to get sold off hard.Today, we'll attempt to spot the red flags in four big names before that happens. >>5 Stock Charts You Need to See We're looking at a combination of highfalutin metrics that point to money problems for companies. To make our list, a stock has to has to meet three out of these four red flag criteria: a bankruptcy prediction formula called Altman's Z-Score that registers at less than 1.8 (that indicates financial distress); rising CDS spreads, indicating that institutional investors are pricing in a higher probability of bond default; and dropping sales and inventory turnover. That quantitative approach to finding out red flags avoids the bullish bias that's historically put blinders on investors. So, without further ado, here's a look at four red-flag names to sell this summer. >>5 Earnings Stock the Bears Hate -- but You Should Love
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV