When it comes to investing, picking the winners is just as important as avoiding the losers: it’s one of the reasons hedge fund managers make so much money. While a healthy, stable stock can earn you a 25 percent return over, say, three or four years, a company that goes wrong can lose that much before lunch.

Spotting problems that are causing a stock price to collapse isn’t easy, but there are telltale signs that a company may be in troubled waters….