If you are a shareholder of a publicly listed company, you may exercise your "inspection" rights to review corporate books, expense reports, internal e-mail, minutes of board meetings, and other corporate documents.

Although it's probably not too exciting on the surface, it's important to do this because you never know what you'll find! Use these rights to conduct due diligence once you own the stock.

Here are some warning signals you may come across:

• There's a lot of public relations "sizzle" around the company and/or the CEO, but you can't find evidence of a strong business plan.
• Every Wall Street analyst loves the stock and is talking it up. As we've said many times, experience has made us suspicious of any Wall Street darling.
• Senior company executives are selling a lot of their stock in the company. Do they know something you don't know?
• The revenue growth from one quarter or one year to another is very strong, but there's no specific new product to explain the rapid increase. Growth figures can be nothing but an accounting sleight of hand.
• The company is buying up other companies left and right that aren't even related to its core business. Whatever happened to sticking to the businesses you know best? Duh!
• The company's cash flow (defined as cash on hand to pay bills, salaries, expenses, and general overhead) is anemic. Cash flow is cash that is already sitting there. It is not "accounts receivable." Nor is it "net income." An unscrupulous or overly aggressive accounting firm can use all kinds of tricks to make net income look large. Look for a company with a strong CASH FLOW.
• The company is carrying an excessive amount of debt or is significantly increasing its debt. Guess which investors are going to suffer the most if the company can't meet its obligations: the small ones who don't have the scoop on when to pull out.
• The company has a history of suspending or reducing its dividends, or has recently stopped paying dividends. Something is amiss!

If your due diligence uncovers any of these potential problems, give some serious thought to selling that stock.

Keep your investing skills sharp with these important articles:

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