By: DanielXX DanielXX's intro: The below is extracted from the Nextinsight share investors' site, a no-nonsense website whose founders include a former business journalist and a head of a well-known local investor relations agency. The article is written by Sim Kih. The writeup was in turn based on a lengthy JP Morgan report on the dangers of S-stocks. The reason for my highlighting this article is that it offers many key insights on what things to look out for when stockpicking S-chips, or so-called "warning alerts". An article worth archiving for future reference. It is my belief that once you know what red flags to spot and what stocks to avoid, you will have controlled your downside pretty well. Why else do you think JP Morgan is one of the survivors, or some might even say a key beneficiary, of the current credit crisis? One thing to note: the valuation screens used can be moving targets. There is no reason to claim that say, a PE<10 means a good stock pick, if most other peers are trading at <5X. In other words, one has to watch the relative valuations available on the market and cannot use rules-of-thumb blindly. Read more...