Contrarian Shopping List

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

Out of the quadrillions of quotations quarried from that most loquacious of quotationists, this one holds a special place in the hearts of Foolish investors. Are you looking to "buy low" so as to later "sell high?" If so, your best chance of getting that initial, low entry price comes when panicked sellers are unloading their shares at whatever price is on offer.

In today's column, we search the ranks of Wall Street's motivated sellers and note which stocks they're most frantic to unload. Therein may lie the makings of a contrarian investor's shopping list. But don't just take my word for it. Before you decide to go in through Wall Street's out door, check your thinking against the collective intelligence of Motley Fool CAPS investors.

Today's contenders include:

	30-day price decline	Currently fetching	CAPS rating
Credence Systems (Nasdaq: CMOS  )	29%	$3.45	*
Osiris Therapeutics (Nasdaq: OSIR  )	37%	$13.83	*
Fremont General (NYSE: FMT  )	38%	$8.71	*
Impac Mortgage (NYSE: IMH  )	31%	$5.96	*
American Mortgage Acceptance (AMEX: AMC  )	30%	$12.13	*
Outdoor Channel (Nasdaq: OUTD  )	27%	$10.06	*

Companies are selected from the "Institutional Ownership Down Last Month" list published on MSN Money on the Saturday following close of trading last week. Price decline and current pricing also provided by MSN Money on the same date. CAPS ratings from Motley Fool CAPS.

Pardon me, but haven't we met?
Ordinarily in this column, we sift through the rubble of Wall Street's rejected stocks, in search of something with a bit of glitter to it -- a diamond in the rough, to overuse an already oft-abused cliche. Today's list, however, offers no such prospects. Quite literally, every single stock on today's list ties for the CAPS booby prize: a one-star rating.

Lacking a hero to zero in on, I'll instead use today's column to highlight panned pick Credence Systems. If you know the name, that should come as no surprise. The stock made a cameo appearance in the Dec. 11 edition of the companion column to this one, "Wall Street's Wish List." If you're unfamiliar with that column, allow me to introduce you: It serves as a mirror image to this one. Here, we look at stocks that Wall Street is selling, on the off chance there are babies to rescue in the bathwater. In "Wish List," we look at stocks that Wall Street is buying, in case we might want to do likewise.

Long term buy and hold? Meet short term buy and sell.
My point being that the same Credence Wall Street's selling this week numbered among the stocks-that-Wall-Street-couldn't-get-enough-of just two months ago. So much for "long-term buy and hold," eh? This, my friends, is the kind of short-term trading that at last count had lost a combined 37 points (relative to S&P 500 performance) for the four Wall Street firms known to track the stock. Ouch.

Over on CAPS, just 16 out of 67 investors have rated Credence an underperformer. But at the All-Star level, the vote gets a whole lot closer -- 15 outperforms versus 11 underperforms (including yours Fool-y). Let's listen in on what Fools are saying about Credence. Each of the following quotes comes straight from a CAPS all-star, ranking in the top 20% of all investors tracked by CAPS:

• NetscribeTech introduces us to the company: "Credence Systems (CMOS) designs and manufactures engineering validation test equipment and automatic test equipment (ATE) used to test integrated circuits. Post acquisition of NPTest, Credence has extended into the higher-end portion of the ATE segment, repositioning itself as a top-tier player in the market." NetscribeTech's bearish thesis goes like this: "The unattractive economics of the ATE market are reflected in Credence's... operating margins of negative 44% and returns on invested capital of negative 7% during the latest semiconductor industry cycle... its sales fell 2% in 2005 because of weaker demand for ATE systems. As ATE market has matured it is unlikely that company will experience the same growth that it saw in the past."
  
  
• chk999 agrees, writing: "They have more debt than cash, revenues are shrinking and they don't seem like they will claw their way out."
  
  
• But superstar investor and Motley Fool Pay Dirt analyst TMFPlatoish1 begs to differ, arguing that: "This company is a turnaround story in progress... Credence just announced a restructuring plan including laying off 14% of their staff and reducing controllable expenses. This should put them on the road to break even or small profitability... [E]arly indications indicate to me that they may be starting to get it. This one will take a year or so to play out and see if a turnaround is indeed in the cards."

Until Thursday's fiscal Q1 2007 earnings report came out, it did indeed look like Credence was turning the corner. Its Q4 2006 news was simply superb, and in Q1 2007, although sales declined, the company essentially broke even from a GAAP profits perspective. My main concern is that this was essentially a given, because Credence took a "big bath" in Q3 2006, a move often calculated to make future results look better by comparison. Knowing this, and seeing that the firm kept mum on its cash flow in its last earnings report -- has me still doubting Credence's recovery.

So as you see, Foolish minds differ on Credence. Speaking of which, what's your opinion? On Motley Fool CAPS, it doesn't matter if you've got a TMF in front of your name, or a CFA behind it: All views are welcome. Tell us yours.

Fool contributor Rich Smith does 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 17 out of more than 23,000 raters. The Fool has a disclosure policy.