1.Indebt Companies:

Stay away from heavily indebted companies, as they struggle to survive in recessions when revenue is limited, and a significant portion is allocated to interest payments.
For example, TELUS is indeed a company that carries a substantial amount of debt.
Investing in high-debt companies during a turnaround, when they’re showing signs of improving financial health and have a solid plan to pay off debt and boost profitability, can be a wise move. However, it’s important to remember that turnarounds always come with significant risks.

2.Cyclical stocks trading at all-time highs

Avoid companies in cyclical industries with all-time high revenues but unexpectedly low P/E ratios, as the low P/E ratios indicate investor doubts about the sustainability of revenue due to the cyclical nature of the stock.
Cyclical companies include automobile manufacturers, airlines, furniture producers, steel manufacturers, paper companies, heavy machinery manufacturers, hotels, and upscale restaurants.
It’s better to invest in cyclical industries when they start recovering from a downturn.

Stay away from companies with excessively high dividend payout ratios, as their stock prices may fall significantly if they cut dividends during tough times. Such companies may struggle to maintain dividend payments in the future as they lack opportunities to invest in growth and financial stability.
For example, Pfizer’s payout ratio is around 454.05%. You can see that the stock is currently trading 60% lower than its all-time high.
Investing in companies with a strong retention ratio is preferable. This metric illustrates the percentage of a company’s earnings that it retains and reinvests rather than distributing as dividends to stakeholders.

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