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Value Abounds, but It's Not Time to Buy

This column was originally published on RealMoney on Aug. 18 at 2:30 p.m. EDT. It's being republished as a bonus for readers.

The accepted wisdom is that when the market has been as bad as this one has been over the past month, investors should raise cash and build a watch list of stocks to pile into when the market finally turns up again.

That's what I've done, and my watch list now runneth over.

It's difficult to tell precisely when this market will finally give more credit to the enormous number of beaten-up, black-and-blue-and-still-bleeding value-type plays with good long-term prospects. Insiders have certainly not been shy lately to point out when they see such plays.

It's not only that the raw numbers of companies with open-market insider purchases are higher so far this year than at the same time last year. More important to me is that there are more firms than usual making it through my process for weeding out significant insider purchases from those that are mere noise.

That said, even though the longer-term fundamentals of many of the stocks that are passing my initial insider-based screening look perfectly decent, the utterly cruddy technicals of most of the stocks have made it easy for me to restrain myself from buying them right away. All of the stocks I mention below, for instance, have 50-day moving averages below their 200-day moving averages -- the so-called death cross.

Although most have traded well over the past week, it's still not obvious that these stocks will break out instead of just fading at resistance.

Secure Computing (SCUR) is typical of a lot of the stocks on my watch list. The share price of this security software and hardware firm reached a low of $4.82 last month, nearly 70% below highs hit just last January.

Secure recently acquired a competitor called CyberGuard, but problems closing the purchase and integrating it have hurt results for the past two quarters. Secure has had a decent history of completing small acquisitions over the years, but the CyberGuard transaction was much larger than ones the company normally undertakes. What's more, Secure also recently purchased CipherTrust. That deal is expected to close next month.
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