Get Ready for the Bounce

"Don't catch a falling knife," as the old saw commands. (Pardon my mixing a cutlery metaphor.) The idea of buying a former superstar stock at a discount price certainly has its attractions, but you've got to make sure you catch the haft -- not the blade. That's where Motley Fool CAPS comes in.

Today, we once again stand beneath Mr. Market's silverware drawer, measuring which knives have fallen the farthest. Then we'll call on CAPS to ask which of these stocks -- if any -- Foolish investors believe are ready for a rebound. Let's meet today's list of contenders, drawn from the latest "52-Week Lows" list at Nasdaq.com:

52-Week High

Currently Fetching

CAPS Rating (out of 5):

Calumet Specialty Products 

(NASDAQ:CLMT)

$55.26

$20.79

****

ActivIdentity Corporation   (NASDAQ:ACTI)

$5.25

$2.24

***

PharmaNet Development  (NASDAQ:PDGI)

$43.05

$23.71

***

Mac-Gray Corp (NYSE:TUC)

$17.25

$8.94

*

ICU Medical  (NASDAQ:ICUI)

$44.84

$24.13

*

Companies are selected from the "NASDAQ 52-Week Low" list published on Nasdaq.com on the Saturday following close of trading last week. 52-week high and current pricing provided by Yahoo! Finance. CAPS ratings from Motley Fool CAPS.

If there's one good thing about a broad-based market sell-off, it's that you find a lot of terrific companies getting the ol' baby-'n'-bathwater treatment -- tossed out on their rosy little bums as if they were bums of another sort. You know -- just know -- that some of these babies are gonna bounce right back once the suds subside.

In today's list of market castaways, we find two companies getting panned. Two more are given grudging passes. And -- whoa, Nellie! What have we here? Why, it's none other than August 2007 Motley Fool Income Investor pick Calumet Specialty Products, and it's getting top props from CAPS investors. Let's find out why:

The bull case for Calumet Specialty Products
For those not familiar with the company, Calumet is at the most basic level an oil refiner. And while you may not have heard of this particular refiner, you've certainly heard by now how high oil prices are turbocharging the profits at oil producers like Exxon Mobil (NYSE: XOM  ) ... at the expense of oil refiners like Valero (NYSE: VLO  ) . The fact that Calumet is more like Valero than it is like Exxon tells you, in a nutshell, why this stock is down more than 60% over the past year.

But that's just the basics. For more on this company, and why investors love it still, we turn to:

  • normalbias, who tells us that Standard and Poor's likes Calumet. normalbias also cites Calumet's "small nuber of shares, high insider ownership, [and] great dividend" as pluses.
  • CAPS All-Star ReInAd agrees, adding: "CLMT is trading at half the industry P/E. It's paying a dividend of 10.7% and the CAPS All-Stars are high on the company. It's gotten grossly oversold on a technical basis. What's not to like at this price?"
  • Or even a much higher price. Back in August, when shares cost nearly one-and-a-half times what they fetch today, another CAPS All-Star endorsed Calumet. As bullshiite wrote back then: "Young company ... has seen some nice growth. They are expaning their production capacity 4th quarter 2007 and I feel 2008 will be a great year for this company."

Sad to say, that prediction has not yet proven prescient. As far as capital appreciation goes, Calumet has been an unmitigated disappointment over the past year. But there's a silver lining to this particularly gloomy cloud: The stock now yields a good 11.8%. Assuming Calumet sticks to its dividend plans, it won't matter whether the stock itself goes up or down. You should be able to beat the market's historical rate of 10% returns just by sitting in your favorite Barcalounger, cashing the dividend checks as they roll in. Bounce or no bounce, Calumet looks like a winner.

Time to chime in
Of course, the aim of this column isn't just to tell you what I think about Calumet Specialty Products -- or even what other CAPS players are saying. We really want to hear your thoughts. Click on over to Motley Fool CAPS and tell us what you think.

And to learn what the friendly Fools at Motley Fool Income Investor think (remember that Income Investor recommended the stock), try out the service for 30 days, and read our debate over just how safe Calumet's dividend really is.


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