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1. Questionnable accounting practices
You can't make a quantitative deduction to allow for an unscruplous management the only way to deal with such situation is to avoid them.
2. Financial trouble is lurking
Rapidly increasing inventory, weak earning power in combination with lots of liabilities, rapidly increasing debts etc
3. New Competition
Avoid companies with rapid increase in new competition
4. Detoriating management
If management is getting worse that will reflect in returns.
5. Earnings with an upper limit
Business with little or no growth projections should be avoided.
6. Convertibles & stock options
Beware of companies that have issued convertible securities and stock options. If the value of the company increases, these securities will be converted into common stocks and dilute your return.
Ian M. Mugoya