forex signal system trading: [EPISODE 22] When Companies Tell You It’s Time to Sell Your Shares

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Ways Companies Give Investors a Sell Signal

Most of the time, all you're going to get out of a company is the data they're required by SEC regulations to disclose. That's usually hard data like earnings, revenues, cash flow, and other financial statements. While these statements can give you an idea of how a company is faring, companies send out other signals as well.

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Some are good, and some are bad.

The bad signals—signs that it may be time to sell your shares, because they're either about to drop or underperform the market for some time—come in a few different shapes and sizes.

One personal favorite is a signal dubbed the "edifice complex."

That's when a company announces that they're going to spend lots of (shareholder) money on a boffo new headquarters building. It's even more expensive if they're building from scratch, but it's also a sell signal. Besides the expense, the company probably made the decision during the boom times, when things look rosy and when they also look like they'll keep being rosy forever.

But reality has a way of catching up. What looks like an attractive space for a growing company may, in a few short years, prove to be more of a boondoggle. Investors are better off buying companies whose headquarters were purchased at bargain prices from a once high-flying competitor.

A major merger could also pose poor shareholder performance going forward. That's because large mergers are sold to investors as a chance to develop synergy between two existing companies or brands. And that the backroom parts of the business (accounting, marketing, sales and the like), can be combined and reduced for cost savings.

Yet many large mergers tend to end up delivering poor results to shareholders. Worse, they may even signal a short-term danger to the market, like the AOL-Time Warner merger at tail end of the dotcom era.

Finding and recognizing these news events can give you an edge—at least in terms of when to avoid investing in a company! While many companies may simply see their shares underperform, others have dropped some of the announcements above right before they ended up going under entirely.

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