This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Treasure and Trash When Dumpster Diving for Stocks

Stocks in this article: CAB CNO EBAY GCI JCP RSH

NEW YORK (TheStreet) -- Buying distressed securities is one of the tools in the arsenal of value investors. We sometimes buy stocks that few other investors want: stocks that are downright ugly in many respects. The key here is to identify situations where, no matter how bad the situation may appear, the punishment inflicted on a stock by the market is beyond what is deserved.

This can be a risky game, and it's easy to make mistakes. It's also easy to fall into some bad investment habits. I've certainly made my share of miscues in this area. But when you are right, the rewards can be great.

This type of investing is much easier, for lack of a better word, when the markets are under tremendous stress as they were in 2008 and early 2009. The likes of Gannett (GCI), Saks (now owned by Hudson's Bay (HBC:Toronto)) and many others were priced for bankruptcy, and the rewards of buying those names were great. Others, such as Cabela's (CAB), and eBay (EBAY), were not truly in distress but were priced as though they were in big trouble. The rewards of buying them have been stellar.

It was an irrational market, and those that could get past the seemingly never ending freefall and daily doses of bad news were able to take advantage.

GCI Chart
data by YCharts

It's a much different environment today. The bargains are not plentiful, and there are a whole bunch of value investors who are bored because they can't find much to get excited about. One value manager told me recently that his firm is doing a lot more selling than buying.

With so little to be excited about in deep value land, it becomes easier to fall into the traps.

1 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,356.87 +288.00 1.69%
S&P 500 2,012.89 +40.15 2.04%
NASDAQ 4,644.3120 +96.4780 2.12%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs