Value Scarce in a Rally

NEW YORK ( TheStreet) -- Who knows how long the current rally can last, because I certainly don't. What I do know is that we've been here before; times when the markets appear to be frothy, but continues the upward trend for far longer than our behavioral-finance influenced minds believe is possible.

We hit new highs, and it's time for a pullback, or so we think. I've got to admit that I've been feeling that way lately, but for me, it has little to do with the current level of market averages, little to do with an arbitrary closing price on a particular index, or the way a chart looks.

It's much simpler than that in my little world of value investing. It's just getting harder to uncover compelling ideas. Value, as I define it, is scarce right now, and you've got to turn over a lot of rocks in order to find anything interesting. The cupboards are a bit bare right now.

Net/nets (companies trading below net current asset value) are as rare as I've ever seen. Other value screens that I utilize reveal very few names of interest. I keep seeing a lot of small retailers, and semiconductor names. Many of these appear to be cheap, but have too many fleas, even for me, and that's saying a lot from a guy who owns RadioShack ( RSH).

One fascinating thing at this point are the companies that are not participating in the rally. The much maligned Apple ( AAPL), which was a $700 stock six months ago, is now a $430 stock, down nearly 40%. The same company that has $137 billion, or $146 per share, in cash and securities on the books, trades for 8.5 times 2014 consensus estimates and generates net margins in the mid 20% range.

While Apple is a bit too prime-time for me, if investors continue to turn away from it, continue to beat it into the ground, I'll be waiting. I've had success in the past with companies I'd never thought I'd own, such as eBay ( EBAY), with positions taken when the growth crowd has decided to move onto greener pastures.

JCPenney ( JCP), which I wrote about last week , not surprisingly continues to get the stuffing knocked out of it. The stock is down another 15% since last Friday, as some institutions are reportedly giving up on the name. There's probably more of that to come; it's just not a name that many want to be associated with at this point.

JCPenney now trades at 1.04 times tangible book value per share. At some point, I would be surprised to see it trading well below tangible book. I'm in no hurry here; it will take a nice margin of safety to entice me to take a position, along with some belief that the company can actually be turned around.

I am hearing more chatter from folks that have cash on the sidelines right now, wishing that they'd been all in. But I, for one, still believe that some dry powder here is a good thing.

At the time of publication, Heller was long RSH.

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