Tickers in this Article: PALM, BONT, GOOG, APPL, RIMM
Sometimes, the best investment decisions are based on what you don't buy, or avoid altogether, as opposed to trying to buy something cheap. Indeed, today's market has some seemingly cheap stocks that are clearly better left alone.

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Avoidance Versus Shorting
Investors may often assume that if a stock is to be avoided, going short could still bring in some profit. Indeed, while the main reason for avoiding shares of a company is the belief that the shares may be over valued based on the fundamentals of a business, shorting should not be a default option. Shorting of any kind has a very inherent flaw: capped upside and unlimited downside. While it might not feel the same as a high-risk gamble, that's the trade off you are accepting when you short a stock. It's best to just avoid what doesn't offer value, and not try to get cute and go short.

Tough Times Ahead
Mobile handset device maker Palm (Nasdaq:PALM) is better left alone for the foreseeable future. Its Palm Pre smartphone, along with its other products, are not competing as well as many hoped against Research in Motion's (Nasdaq:RIMM) Blackberry or Apple's (Nasdaq:AAPL) iPhone. While Palm has a market cap of $600 million and a net cash balance of $200 million, sales of its products to consumers are falling off a cliff. In addition, Google (Nasdaq:GOOG) is stepping into the game with Android. Unless Palm can create a blockbuster smartphone soon, the future looks bleak.

Despite being one of the best performing stocks in 2009 with a nearly 900% return, retailer Bon-Ton (Nasdaq:BONT) is not a stock to take on at this point. Against a market cap of $250 million sits over $1 billion in debt. The company is barely profitable, and operates in the ultra-competitive retail industry. Yet Bon-Ton is also a classic case of why shorting may not be the best answer. At the beginning of 2009, when shares were sitting below $2 and the company was up to its eyeballs in debt, short-sellers paid a expensive price. Despite the fact that the fundamentals may have been in favor of the shorts, the company was able to fulfill its debt obligations and remain a going concern. Some who shorted at $2 felt good shorting at $5, until the stock went to $10. With shares at $13 today, a mound of debt and no profit to rely on, shares are best left alone.

The Bottom Line
As an intelligent businessman once said, if there is nothing to do, then do nothing. When fundamentals aren't in your favor, its best to sit on the sidelines. (For more, see Survive The Trading Game.)

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