Seven ‘sinful’ stocks to avoid
2 Aug 17
With the FTSE 100 on an almost continual rise, which are the ‘red flag’ stocks that investors should watch out for? Investment bank Liberum lists the seven ‘sinful’ stocks in the top 100 they would “prudently seek to avoid”.
Supermarket giant WM Morrison was flagged for its commercial income judgements and “onerous lease provision and inventory” as its key areas of risk.
Morrison’s payable days, where the supply chain is stretched to disguise cash flow weakness elsewhere, have increased 30% over the last two years according to Liberum’s analysis.
The note said: “15% of the rise can be attributed to the c.60% drop in commercial income,” and added: “We speculate well flagged competitive pressures could be emphasising the need to decrease working capital investment, via the supply chain, and highlight the risk to short term liquidity of any unwind in credit terms.”
Tags: Investment Strategy
