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 farthest. Then we'll head over to Motley Fool CAPS, and ask which of these stocks Foolish investors think are ready to rebound to new highs -- and why.

With that said, let's meet today's list of contenders, drawn from the latest "52-week lows list" at MSN Money:

Company

52-week high

Currently fetching

CAPS rating

Charles & Colvard (Nasdaq: CTHR  )

$26.89

$7.97

***

Handleman (NYSE: HDL  )

13.55

6.70

**

Fieldstone Investment (Nasdaq: FICC  )

13.99

5.29

*

Crown Media (Nasdaq: CRWN  )

9.69

3.02

Unrated (-6)

Cyclacel Pharmaceuticals (Nasdaq: CYCC  )

8.70

7.60

Unrated (-8)

FiberTower (Nasdaq: FTWR  )

N/A

5.85

Unrated (-9)

Opteum (NYSE: OPX  )

9.95

7.29

Unrated (-6)

Companies are selected from the "New 52-Week Lows" list published on MSN Money 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.

Knives and knaves
As you can see, our fellow investors over on CAPS aren't terribly enamored of this lot. The vast majority of the stocks on MSN's "shot" list don't even have CAPS ratings; they're too small and too illiquid to merit inclusion in our service. The seven stocks listed above do make the cut -- but two out of the three that are most heavily followed on CAPS receive worse-than-average ratings. The closest thing to a "winner" we've got this week is Charles & Colvard, the company that pioneered the use of low-cost silicon carbide as a diamond jewelry alternative. (You know it as "moissanite.")

Ready to bounce?
Of course, knowing who's fallen hardest is only half the battle. You still need to decide whether to reach out and grab the knife. That's where CAPS comes in. We've assembled more than 16,000 investors (and counting), and invited them to tell us which stocks they expect to outperform or underperform the S&P 500. We've weighted the smartest investors' (as judged by their past performance) opinions most heavily in assigning our star ratings. Here's what our lay analysts have to say about Charles & Colvard:

  • CAPS newcomer wilsonbarber gives us a great rundown of C&C's recent business achievements, summarizing by saying: "What is important about 2006 is the lesson of reliance on [too] few direct customers (Reeves Park and K&G Creations) for the bulk of their business. Going into 2007 with additional jewelry manufacturers will give the company greater scale to smooth out irregularities among their direct customers."
  • In rebuttal, CAPS All-Star ikkyu2 thinks that cheaper price notwithstanding, moissanite simply can't compete with the diamond industry. ikkyu2 calls the industry's "150 year old marketing campaign . [C&C's] core issue and [thinks] it's a fatal flaw, never mind [C&C's] financials or their free cash flow or their corporate governance."

At last count, 92 CAPS analysts had posted their opinion of C&C, in contrast to the barely two dozen who've rated Handleman and Fieldstone. Meanwhile, the other four stocks making today's list have only a handful of ratings -- too few for us to get a good read on how many "stars" these companies deserve.

But they don't have to stay that way. You see, Motley Fool CAPS is the great equalizer. Here, it doesn't matter whether you work for an investment bank, or as a teller in a bank; whether you've got a CFA attached to your name, or you're still working toward your B.A. If you've got knowledge to contribute on one of the stocks named above, come on over and tell us about it.

Motley Fool CAPS: Where all investors have their say, and the best arguments carry the day.

Fool contributorRich Smithdoes not own shares of any company named above. You can find him on CAPS, publicly pontificating under the handle TMFDitty, where he's currently ranked 457 out of more than 16,000 raters.


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