Sun Microsystems (JAVA) is a fascinating case study right now. Rarely we see a company that would qualify as a "going concern" with financials and market valuations like this. The specific anomaly I am referring to is that Sun has more cash and short term investments on their balance sheet than total market capitalization. That means that if it were possible, they could buy all their own outstanding stock for the cash they have in the bank.

I have seen this a few times and it is not always a good thing. The implication here is that investors believe that Sun is going to need to burn through that cash in the short term to sustain operations. However from an aggressive value position, this is may be an interesting opportunity to invest in a company that is undervalued according to just about every definition of the term.

JAVA Weekly chart


Another example of some interesting "bottom fishing" opportunties floating around in the market right now.

By the way, I actually worked for a company that was in this situation a few years ago and they moved from $.17 a share to $18.23 in 4 years. The upside can sometimes be pretty nice if one of these beat up companies can turn it around.

Want to learn more about value investing? Check out this article here.

From your videos on LEAPS wouldnt you think now is a good time to invest in some of those bottom stocks like Java that are so low they have no where to go but up ?

Right now is definitely a good time to consider LEAPS. Just be careful thinking stuff like "It's so low already, it can't do anything but go up." You'd be surprised how much lower a stock can go if the market is still in panic mode. Make sure that you are buying LEAPS on stocks you have analyzed and believed they are inappropriately priced too low and that the company will be able to survive the recession.

Yeah - buying a leaps in this situation is a risky bet but it could pay off big. But keep in mind what happens to stocks and options if someone declares bankruptcy. It isn't that buying bottom dwelling stocks is bad it is just a matter of making sure you appreciate the risks.

You know what would be interesting? We should create the LM Bottom Fishing Portfolio. We will build a portfolio of some of these really beat up stocks that still look like going concerns and then see how our returns look in a year compared to the market as a whole. It is a bit like being a VC. All you would really need is for one of these stocks to take off and you could be profitable.