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Slim Pickings in Deep Value Land

Net/nets sometimes appear to be cheap, but aren't; some may be on their last legs, and ultimately on the way to bankruptcy. In making that determination, balance sheet quality is an important factor. Since current assets are integral to the calculation, they should be scrutinized and evaluated. For instance, you would place a much higher value on cash and short-term investments than on inventory and receivables. While the value of the former two can be known with certainty, inventory must be sold and receivables collected in order for their values to be realized and there are no guarantees there. All else being equal, I'd be more interested in a net/net with ample cash than gobs of inventory.


Systemax is expected to report first quarter earnings on May 6. There are just two analysts covering the stock and the "consensus" is calling for earnings of 5 cents per share. For now, the company is on my radar.

At the time of publication the author held no positions in any of the stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

Jonathan Heller, CFA, is president of KEJ Financial Advisors, his fee-only financial planning company. Jon spent 17 years at Bloomberg Financial Markets in various roles, from 1989 until 2005. He ran Bloomberg's Equity Fundamental Research Department from 1994 until 1998, when he assumed responsibility for Bloomberg's Equity Data Research Department. In 2001, he joined Bloomberg's Publishing group as senior markets editor and writer for Bloomberg Personal Finance Magazine, and an associate editor and contributor for Bloomberg Markets Magazine. In 2005, he joined SEI Investments as director of investment communications within SEI's Investment Management Unit.

Jon is also the founder of the Cheap Stocks Web site, a site dedicated to deep-value investing. He has an undergraduate degree from Grove City College and an MBA from Rider University, where he has also served on the adjunct faculty; he is also a CFA charter holder.

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