The Top 10 Warnings Signs a Stock is on the Decline

Every investor has the same goal when they buy stocks: They want to make money. And whether you’ve purchased stock based on penny stock advice or invested in some other funds, you still need to recognize when your investments are declining and it may be time to sell. Regardless of the reliability of penny stock tips you may have gotten in the past, here are 10 warning signs to be aware of.

  1. Earnings grind to a halt or are trending southward. Even a portfolio balanced with hot penny stocks isn’t immune to swings in the market, so watch a company’s earnings for signs of trouble. Are they going up or down?
  2. Sales start to retreat. In order to make money with penny stocks, keep your eyes open for sales figures and when they appear to be slipping. If sales are going down, and you see a trend developing, then you don’t want to invest. Be patient and wait it out.
  3. Too much praise from analysts. Analysts can become enamored with their own penny stock picks just like anyone else, and toss out stock advice based on their own emotions rather than empirical data. On the other hand, they may be driven by something else – simple greed. Remember, the company an analyst works for receives fees from the stock they tout, so you may not always be getting honest opinions.
  4. Inside sales. If you notice a spike in sales, the first thing to do is to see who’s doing the selling. If shares are being sold off in immense quantity by company employees, particularly executives, then something’s wrong.
  5. Negative press. The press is notorious for promoting bad stories, but it’s worth noting that negative stories about a stock or company may be legitimate news reporting off something going on at the company that would make it a poor investment choice.
  6. Problems within the industry. Remember when the American domestic automotive industry nearly went bankrupt? Because of problems with the auto companies, dozens of others were at risk – everything from manufacturing suppliers to temporary employment agencies to small mom-and-pop diners situated near factories ready to be closed. If your industry is experiencing difficulties, that could translate into a tenuous future for your stock.
  7. Political issues. Politics always affect the stock market, whether it’s in Europe, the United States, or elsewhere. In fact, every U.S. presidential election results in pundits making dire predictions about Wall Street if one party takes office over another.
  8. Debt rises or is unsustainable. If your stock’s company has rising debt, or suddenly cannot manage the debt it has, then that’s another warning sign of a possible decline.
  9. Accounting and financial statements. Pay attention here, too, as suspicious accounting or financial statements are more signs of trouble.
  10. Dividend cutbacks. If a stock regularly paid a dividend, but isn’t doing so anymore, that’s another red flag indicating your stock may be on the downswing.

Making money in the stock market can be difficult during trying economic times, but if you pay attention to the warning signs we just discussed, you’ll have a stronger foundation to build on.

Technorati Tags: , , , , , , , , ,