What stocks to avoid and what not is always a puzzling question, What do I think?
1) Businesses that risk all:
I have a certain disdain for companies that gamble all their worth. Best example would be Lakshmi Mital. In a cyclical industry like steel, he is buying one company after another. Initially this risk might pay, but ultimately one wrong decision and the company will be clean bowled.
2) Research oriented company:
There is never a guarantee that the company will be able to deliver a new technology after another. In fact the small companies are more likely to discover the next wonder-drug than the billion dollar behemoth. But there is one guarantee that their patents will eventually expire and the cutting edge they command will tarnish.
3) Debt burdened company:
Interest rates currently is very low. A slight change in interest rate will play a havoc on these companies. Also one more bad year and the management will be taken over by the bankers and the lenders. That is why I am sometimes scared when people talk about investing Jet Airways.
4) Questionable Management:
If you do not trust the management then stay away from the company. They are more likely to fill their coffers then pay you dividend.
5) Resurgence Package:
All the companies which require frequent doze of capital and bail out packages to survive make more money for the bankers, employees, govt, and the bailing body then they make for you.