Fearful Stocks for Greedy Investors

"We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful." -- Warren Buffett

Of all the Oracle of Omaha's orations, this one holds a special place in Foolish investors' hearts. When looking to bag a bargain, a panicked sell-off by jittery investors offers you a great chance to snap up stocks on the cheap.

In the short term, professional traders' pessimism can become a self-fulfilling prophecy. Desperate institutions lower their asking prices to get rid of a stock, prompting buyers' bid prices to fall in tandem, creating the very price decline that both sides feared in the first place -- until the selling stops.

Until it does, savvy investors can "get greedy," snapping up bargains from these fearful sellers. (Assuming they really are bargains.) In today's column, we'll see which stocks Wall Street's motivated sellers are most frantic to unload. Once we've compiled this shopping list of potential picks, we'll check them against the collective intelligence of Motley Fool CAPS.

Today's contenders include:

Companies are selected from the "Institutional Ownership Down Last Month" list published on MSN Money on the Saturday following close of trading last week. Recent price provided by Yahoo! Finance. CAPS ratings from Motley Fool CAPS.

Up on Wall Street, the investment bankers are selling these stocks just as fast as they can find buyers. Down here on Main Street, though, we're a more patient bunch. While Fools aren't rushing to load up on gold stocks anymore, and appear less than enthused about Oracle replacing IBM (NYSE:IBM) as a suitor for Sun, their three-star ratings on most of these stocks suggest that CAPS investors are adopting a "wait and see" attitude.

In all cases but one, that is. When it comes to Teekay Corp., Fools perhaps see an opportunity to profit from Wall Street's panic over the Somali piracy epidemic. Why? Let's find out, as we set sail in search of ...

The bull case for Teekay Corp.
Writing in a pitch last summer, dannp argued: "Unless our country starts cutting back on imported crude, this company will be greatly needed." Nor is oil the only play here. As GeorgietheCorgie pointed out way back in 2006, Teekay also has "a strong LNG [liquid natural gas] fleet."

Put it all together, and in January CAPS All-Star GirlScoutDad came to the logical conclusion on Teekay: "buy low, sell high. In the meantime, get paid to wait."

Get paid how much?
Right now, Teekay is paying out a juicy 9.8% dividend. Which sounds good ... until you realize that it may go the way of the yields on former shipping highfliers DryShips (NASDAQ:DRYS), Excel Maritime (NYSE:EXM), and the dodo. More troubling still, this dividend comes from a company that has no free cash flow -- suggesting that income investors betting on Teekay could see a dividend cut in their future. Which becomes all the more likely when you consider that ...

Hold up a sec. What about the pirates?
Huh? What's that? Pirates? Well, we already told them off once. But yes, it's possible that the folks manning skiffs off the Somali coast still haven't got the memo. (Packet service in the Indian Ocean ain't what it used to be.)

Be that as it may, as I was saying, what worries me more than the pirates is the highway robbery that Teekay's capital expenditures expansion program is inflicting on its cash flow. Not since 2006 has Teekay generated any free cash flow from its business. In fact, in the last four quarters the firm has managed to run up roughly $900 million in capital expenditures.

Time to chime in
To me, this rate of cash-burn looks eminently unsustainable. Sooner or later, Teekay must find a way to cut its cash outlays, either through reducing its capex or other strategic measures (read: cut the dividend), or else capsize under the weight of its immense $7 billion debt load. To me, that's a frightening prospect, and real enough that I have no desire to invest in the stock at this time.

That said, I'm a timid soul. Maybe you have a braver heart? Perhaps courage enough to sail these seas, and invest in Teekay despite the risks? If that's the case, then here's your chance to buck up your fellow investors' courage, and explain why an investment in Teekay is a safe port in the storm. Sign the logs here.