Red Flag Alert: 3 Stocks to Avoid

Warren Buffett's first rule of investing is, "Never lose money"...

Rule No. 2 is, "Never forget rule No. 1."

Welcome to The Red Flag Alert, a rolling roster of stocks to avoid.

When I did short research, the greatest compliment we could get would be from investors who said we kept them out of a stock... or kept them from buying more before it tumbled.

That's the idea behind the Red Flag Alert...

And right now, there are no shortage of companies whose financials are flashing red flags...

Or as Cornell business professor Sanjeev Bhojraj told Bloomberg, in an article about how manipulation hasn't been this bad in three decades...

Managers are under so much pressure to deliver earnings that they're using a lot more accounting than they have in the past to make their earnings look good. If my dollar of earnings has no cash or negative cash, that's poor quality because all the earnings that I have are just accounting.

Bhojraj also is a co-founder of Kailash Concepts (KCR), whose data I'm using, at …