Get Ready for the Bounce

"Don't catch a falling knife." Thus commandeth the old saw (to mix a cutlery metaphor.)

But if people weren't tempted to catch cutlery in the first place, there'd be no need for this little bit of investing wisdom, would there? The idea of buying a former highflier at a discount price certainly has its attractions. The trick, of course, is to increase the odds that when you make your grab, you're catching haft, not blade. That's where we come in.

In The Motley Fool's continuing effort to keep your investing dollars safe, today we once again assume our position beneath Mr. Market's silverware drawer. As the knives plummet, we'll measure who's fallen the farthest. Then we'll head over to Motley Fool CAPS and ask which -- if any -- of these stocks Foolish investors think are ready to rebound to new highs.

With that said, let's meet today's list of contenders, drawn from the latest "52-Week Lows" list at Nasdaq.com:

Get ready for the bounce: banker's edition
Ahem. If there's one thing the stocks making this week's list have in common, it's that they're all in the banking biz. And if there's one other thing they've got in common, it's that CAPS players don't expect any of them to outperform the market going forward.

The best-liked of the bunch, Bank of America, gets only a grudging three stars on CAPS, an indication that investors believe it will only pace the market. But there are still a few bulls wandering the fields out there -- so let's meet them.

The bull case for Bank of America
CAPS All-Star AndyShea says:

This stock has been unfairly punished as investors (a mix of short term traders and inexperienced others) let emotion cloud the underlying fundamentals. ...[A] diversified strategic plan for growth, outstanding dividend while we wait ... there's little reason to suggest this one won't head higher in the next 6-12 months.

As fellow All-Star Treylx observed in June, "Next month [July 2007] they acquire the private banking part of Charles Schwab (NASDAQ:SCHW), which in turn moves them to number 1 in the private banking industry with more assets [under management] than JPMorgan Chase."

And yet another of our best CAPS players, optionwinners, sums it all up for us:

I think that the big money center banks are getting [beaten] down with the hype of the credit problems. If you really think that the economy in America or the World isn't growing then run for the door. If you are like me and know that there is growth out there then you will understand that this is a correction in the market and financials are getting pounded. ... We are now able to pick up great financial companies with great dividends, low [price-to-earnings ratios] and incredible management.

Let's quality-check that last statement, shall we? Bank of America currently trades for 10 times trailing earnings, 13% less than the average stock in this industry. Does anyone seriously argue that Bank of America is a below-average company, though? As far as having a great dividend, Bank of America yields 5.8% today -- great enough to win the stock a place in the Motley Fool Income Investor portfolio, where it's been a recommendation for two years now.

Time to chime in
Of course, the aim of this column isn't just to tell you what I think about Bank of America -- or even what the other CAPS players are saying. We also want to hear your thoughts on the bank. Is there more bad news in store as the subprime crisis/housing debacle/credit crunch deepens, or have we weathered the worst of the storm? Click on over to Motley Fool CAPS, and tell us what you think.