NEW YORK (TheStreet) -- Research in Motion RIMM , Ford F , Best Buy BBY , Radio Shack RSH .Don't fall for the popular notion that these stocks represent value plays. Doing so triggers dangerous assumptions. These types of stocks, including a stock I am long -- Nokia NOK -- belong in the speculative section of your portfolio. Value, as popularly defined, sucks you in. If it's a value at $10, it must be even more of a value at $5. I am not saying you should never buy a stock at $10 and then at $5. I have purchased NOK from $3.50 down to near $2. I have bought shares of Pandora P at prices ranging from $9 to $16. They're both speculative plays -- NOK is short-term speculative (as in 3-9 more months), while P is long-term speculative (time horizon measured in years). There's no deep value in NOK. Just as there's no deep value in RIMM or BBY. These companies run the risk of going out of business. They're attempting -- some better than others -- to execute massive turnarounds. In these cases, shareholders might actually win if the companies "lose"; a buyout could possibly add "value." There's that word again -- "value." If Microsoft MSFT shells out $3 a share for Nokia, it assigns the company a value. Generally, in these situations, the market follows. However, absent an acquisition, analysts and investors cannot merely run numbers and call a stock -- be it NOK, RIMM or BBY -- a value. While your "model" might spit out a value of $14.42 for RIMM on the basis of patents, real estate, brand, product pipeline and such, it means nothing until the big money -- be it in the market as a collective force or a corporate buyer -- agrees and sets a own price. There's no reason why the big money cannot just let uncertain specs like RIM dissolve.
The low P/E ratio plays -- F and RSH -- represent equally as speculative bets. Profits hang by a thread in uncertain businesses in evolving spaces in a shaky world economy. Again, the market sets the value. By and large, these stocks have continued to see their share prices decline. Until some event comes along to disrupt the downward spirals, the value you perceive means very little; you're participating in little more than speculation. Don't get me wrong. I love to speculate. You really cannot assign a meaningful value to the stocks people traditionally label "value stocks" -- but that doesn't mean it's mindless. For instance, I am making an educated guess, based on my feel for the space, that Nokia turns things around. Room exists for most investors to use a small portion of their portfolios to do this. For example, you could have done well betting against me and shorting NOK for the last several weeks, months, years (insert grinning smiley face here). For a portfolio's core, I propose a definition of "value" that goes beyond P/E ratio, cash on hand and book value. Reliance on your Granddad's quantitative metrics can get you killed. Instead, pay less attention to the numbers. Focus on a company's business and its strategic-competitive position within a space. Over the last several months, I have labeled several media stocks "values" that I want to accumulate over time. All five -- Viacom VIAB , Time Warner TWX , Rogers Communications RCI , BCE BCE and Disney DIS -- with one exception (DIS), have underperformed the major indices (the S&P 500 Index SPY and the Nasdaq 100 QQQ ) year-to-date. All five have drastically outperformed stocks you so often hear the word "value" attached to these days. Consider the year-to-date numbers, as of Tuesday's close (return in parentheses) and compare them with the five I mentioned at the top of this article:
That's a sign to me that investors have not recognized the value these stocks have to offer. You have strong businesses operating confidently at a zesty clip, growing, expanding lucrative segments, cultivating new ones and paying dividends or buying back stock in the process. Yet, they underperform. It just so happens that I have a thing for the media and telecommunications space. Given the dynamics there, I am comfortable being overweight the sector. But, irrespective of the particular stocks, when you search for value, search for the types of stocks the market truly discounts, not the long shots that have been bruised and battered, torturing investors as they hit bottom after bottom. This article is commentary by an independent contributor, separate from TheStreet's regular news coverage. Follow @RoccoPendola