5 Ways To Lose Money On Stocks

Here are 5 situations that Whitney Tilson lists where investors can lose money:

1. The game has changed.Bargain Hunters and Bottom Fishers Beware!There’s a fine line between opportunity and trouble when a once-strong business goes into decline.

2. High and rising debt. Value investors are naturally drawn to companies in trouble — that’s what makes stocks cheap if the difficulties prove to be temporary. But too much debt can ruin even the best-planned turnaround.

3. Consumer fads. When investors extrapolate far into the future what are highly likely to be impossible-to-maintain growth levels, trouble follows.

4. Serial acquirers or mega-acquisitions. Given the research showing that a significant majority of acquisitions are value destroyers for the buyers, it’s remarkable how frequently investors get excited about roll-up stories or big acquisitions.

5. Aggressive accounting. The gray areas in accounting leave managements considerable leeway in how aggressively or conservatively to represent company operations. When a company’s accounting treatment creates more questions than answers, something is usually wrong.