This column was originally published on RealMoney on March 23 at 2:08 p.m. EST. It's being republished as a bonus for readers.

Negativity makes investors uncomfortable.

A simple way to mitigate this discomfort is to avoid stocks that are enveloped by negativity. The problem with this is opportunity cost. You'll miss out on some extraordinary investment opportunities.

The better way to mitigate negativity is to carefully parse and examine the criticism. That's what I've tried to do in this two-part column on the negativity directed at Overstock ( OSTK). Below, I address criticism involving the balance sheet and management.

'Overstock Has a Liquidity Problem'

My review of Overstock's operations indicates that it has ample liquidity. The company has cash and marketable securities of $112 million and credit lines of more than $50 million.

The company should be cash-flow positive this year. Even if it's not, the notable gross-margin expansion in recent quarters makes the likelihood of anything beyond a minimal operating loss quite low. There would be a "liquidity problem" if sales decline in a material way, but there is no evidence to suggest that this is likely.

The fact that liquidity is not currently an issue for Overstock doesn't stop critics from focusing on it. It's easy to couch data in a way that scares unsophisticated investors. For example, a recent column in the New York Post assailed Overstock's liquidity, saying that the company had a "paltry $11 million in net cash."

That metric is accurate -- Overstock has $11 million in net cash, calculated as cash plus marketable securities minus accounts payable -- but that metric is not meaningful. If it is, some of the finest companies in America are in similar trouble.

Wal-Mart ( WMT) had a net cash deficit at the end of January of over $14 billion. Dell ( DELL) had net cash of negative $782 million as of the end of January. And Costco ( COST) runs a net cash deficit quarter after quarter. The net cash calculation is meaningless for a retail model for a variety of reasons, e.g., it does not factor in the value of inventory.

It is impressive (and capital-efficient) when a retailer grows a business using a minimal amount of capital. In the case of Dell, Costco and Wal-Mart, they are using other people's money (i.e., vendors') to finance their business growth.

Study the operating model of Overstock and you'll see the same dynamic. About 62% of its business is partner fulfillment (product shipped directly from vendor to Overstock's customer). Growing this business requires minimal capital. And this business generates an enduring float.That's because the company receives cash two days after a transaction and vendor payment isn't due for 30 days.

Criticism No. 3: CEO Patrick Byrne Is Crazy

Overstock CEO Patrick Byrne is a prime target for critics. Byrne's use of elaborate imagery (e.g., "Sith Lord") and talk of conspiracy have made it easy for critics to lampoon him. While all the criticism generates entertainment for the media, it obscures some serious charges levied against certain hedge funds, such as manipulation of so-called independent research and front-running. ( and James Cramer were issued subpoenas last month by the Securities and Exchange Commission in connection with an agency investigation into such manipulation.)

For potential investors in Overstock, media attacks on Byrne have added a layer of complexity to the assessment of the company. Investors have to be able to sort through these media attacks, some of which are beyond the bounds of reason. For example, columnist Herb Greenberg (a former columnist at recently lumped Patrick Byrne together with the likes of Al Dunlap, Jeff Skilling and Dennis Kozlowski.

My Trip to Salt Lake City

What is the truth about Byrne? Is this 43-year-old Stanford Ph.D. crazy?

A couple of weeks ago, on a day Byrne was traveling and out of the office, I flew to Salt Lake City to talk with employees at Overstock, including several members of the senior management team. The ostensible reason for my trip was to discuss the company's model and operations with members of the management team. I also wanted to take the opportunity to quiz everyone that I talked to about working with Byrne on a daily basis.

The feedback that I received in Salt Lake City is the polar opposite of the media's portrayal. He is greatly admired within the company for his intellect and energy. He is integrally involved in every department, from analytics to marketing to technology to distribution. People that work with him were uniformly startled, amazed and dumbfounded when I mentioned details of the media's representation of him. It doesn't square with the Patrick Byrne that they work with side by side.

One consistent theme I heard is that Byrne is fascinated with every element of the business. You might think that warehouse distribution would bore a Ph.D. The stories I heard indicate the opposite is true. A manager in analytics told me how Byrne recently helped write the algorithms for a quantitative program to facilitate purchasing decisions. Another manager told me that Byrne regularly talks to employees at all levels in an effort to glean new information.

The only criticism I could get from anybody regarding Byrne is that he is impatient when it comes to implementing operating improvements.

There is no grandiosity or pretense, or even a hint of ostentation, at headquarters. The offices are clean and simple. Several employees pointed out items (in some cases the clothes that they were wearing) that are available on Overstock's Web site. Employees have a strong passion for the brand and the company's mission. I heard Sam Walton's name mentioned several times. Frugality seems to be an obsession at the company, and Walton is held up as a role model.

What Do the Financials Say About Byrne?

The financials of Overstock and SEC filings tell you a lot about Byrne. There is no "pro forma" presentation of earnings. It's always been GAAP accounting. This is unusual for a high-growth company. Byrne also refuses to embrace EBITDA as a framework for financial presentation because he considers it misleading.

Byrne does not take a salary. He owns about one-third of all Overstock shares. He feels his "interests are aligned with shareholders" (per an SEC filing) and has declined incentive compensation each and every year.

This is refreshing to see and, unfortunately, unusual. Large share ownership rarely prevents CEOs from taking more, even though their ownership already puts them in an incentive position. For example, Ralph Lauren of Ralph Lauren ( RL) and Jim McCann of ( FLWS) are among the ranks of leaders who have large ownership positions in their companies -- over 40% and 50%, respectively -- yet still accept huge amounts of incentive compensation. It's costly to other shareholders and it's exploitive because their share ownership gives them effective control of the board of directors. It's rare to find a CEO, like Byrne, who says "no thanks" when it comes to incentive compensation.

If you study the operating history of Overstock in detail, you have to be impressed with Byrne the businessman. There is no precedent in the history of retail for what he has accomplished.

I expect Overstock revenue to exceed $900 million this year. That represents a tenfold revenue increase is just four years. It's been accomplished with a tiny amount of capital, as only $66.5 million of net has been deployed. This includes all equity and debt issuance, with adjustments for current cash and repurchases.

Look carefully at the facts surrounding the early operating history of Overstock and this business story is even more amazing. Competitors had several times more capital than Overstock. They had business relationships and ties to large companies that gave them significant competitive advantages. Whether you like Byrne or not, any objective observer that takes the time to review the facts has to acknowledge his business accomplishments.

It is also worthwhile to read The World Stock Story, written by Byrne. World Stock (a division of Overstock) is Byrne's effort to help artisans in third world countries. This piece clearly evinces an idealistic passion for fair dealing and for not taking advantage of others for profit.

It's fair to characterize Byrne as passionate, opinionated and idealistic. It's fair to call him a maverick. It is grossly unfair and absurd to link him to Dunlap, Skilling and Kozlowski.

Ultimately, though, this may prove to be one the greatest of ironies. Dunlap, Skilling and Kozlowski have gone from widely admired status to positions of scorn and ridicule. In the years to come --- perhaps not on Wall Street, but in business schools -- Byrne may complete the opposite journey.

P.S. from Editor-in-Chief, Dave Morrow:
It's always been my opinion that it pays to have more -- not fewer -- expert market views and analyses when you're making investing or trading decisions. That's why I recommend you take advantage of our free trial offer to's RealMoney premium Web site, where you'll get in-depth commentary and money-making strategies from over 50 Wall Street pros, including Jim Cramer. Take my advice -- try it now.
At time of publication, Alsin and/or ACM was long OSTK, FLWS and WMT, although holdings can change at any time.

Arne Alsin is the founder and principal of Alsin Capital Management, an Oregon-based investment advisor, and portfolio manager of The Turnaround Fund, a no-load mutual fund. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Alsin appreciates your feedback; click here to send him an email.