Spotting Clues In Qs

AAA

DEFINITION of 'Spotting Clues In Qs'

A method of selecting short-selling candidates based on identifying companies that may eventually be recognized for their use of deceptive accounting techniques. The phrase was made popular by Ron Gutfleish and Lee Atzil in the 2004 book "Short Selling: Strategies, Risks and Reward".

INVESTOPEDIA EXPLAINS 'Spotting Clues In Qs'

While the Financial Accounting Standards Board's accounting rules continue to change in an effort to stay ahead of companies' use of creative accounting, many corporations continue to find new loopholes to exploit. Serious short sellers often diversify their normal short-term short-selling strategies by searching for companies whose downturn is not likely to be immediate, but may be unavoidable based on their accounting practices. Novice short sellers should be careful in employing this technique, however, because the longer one expects to hold open a short position, the greater the risk that the stock will move upward creating a margin call and/or loss.

RELATED TERMS
  1. Short Selling

    The sale of a security that is not owned by the seller, or that ...
  2. Annual Report

    1. An annual publication that public corporations must provide ...
  3. Financial Accounting Standards ...

    A seven-member independent board consisting of accounting professionals ...
  4. Naked Shorting

    The illegal practice of short selling shares that have not been ...
  5. Footnotes To The Financial Statements

    Additional information provided in a company's financial statements. ...
  6. David Einhorn

    Known for his short selling strategy, activist investor David ...
Related Articles
  1. Footnotes: Early Warning Signs For Investors
    Retirement

    Footnotes: Early Warning Signs For Investors

  2. Financial Footnotes: Start Reading The ...
    Fundamental Analysis

    Financial Footnotes: Start Reading The ...

  3. When To Short A Stock
    Active Trading Fundamentals

    When To Short A Stock

  4. Playing The Sleuth In A Scandal Stock
    Investing Basics

    Playing The Sleuth In A Scandal Stock

comments powered by Disqus
Hot Definitions
  1. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  2. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  3. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
  4. Net Sales

    The amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any ...
  5. Over The Counter

    A security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, etc. The phrase "over-the-counter" ...
  6. Earnings Before Interest After Taxes - EBIAT

    A financial measure that is an indicator of a company's operating performance. EBIAT, which is equivalent to after-tax EBIT ...
Trading Center