Red Flag


DEFINITION of 'Red Flag'

An indicator of potential problems with a security. Most often used to refer to a stock, a red flag can be any undesirable characteristic that stands out to an analyst. There is no universal standard for identifying red flags; the method used will depend on the investment methodology being employed.


A red flag is anything that marks a stock as undesirable. Because there are many different methods used to pick stocks, there are many different types of red flags. What is a red flag for one person might even be considered desirable by another. For example, low institutional ownership might be a positive for someone looking for undiscovered companies, but a negative for a pension fund that searches out blue chips.

  1. Hold

    An analyst's recommendation to neither buy nor sell a security. ...
  2. Material News

    News released by a company that might affect the value of its ...
  3. Downgrade

    A negative change in the rating of a security. This situation ...
  4. Upgrade

    A positive change in the rating of a security. An upgrade is ...
  5. Analyst

    A financial professional who has expertise in evaluating investments ...
  6. Defined-Benefit Plan

    An employer-sponsored retirement plan where employee benefits ...
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