"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 -- if any.
With that said, let's meet today's list of contenders, drawn from the latest "52-week lows list" at MSN Money:
|
52-Week High
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Currently Fetching
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CAPS Rating (out of 5)
|
|
Vimicro International (Nasdaq: VIMC)
|
$18.26
|
$5.04
|
****
|
|
Kopin (Nasdaq: KOPN)
|
$4.91
|
$3.23
|
**
|
|
Ligand Pharmaceuticals (Nasdaq: LGND)
|
$13.03
|
$6.57
|
**
|
|
Restoration Hardware (Nasdaq: RSTO)
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$9.65
|
$5.47
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*
|
|
CalAmp (Nasdaq: CAMP)
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$10.19
|
$4.85
|
*
|
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Trans World Entertainment
(Nasdaq: TWMC)
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$38.18
|
$5.02
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*
|
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
Once again, our list proves the converse of the "everybody loves a winner" maxim. When a stock falls on hard times, its popularity evaporates real quick. Thus, today's list is chock-full of companies that CAPS investors rate as likely underperformers -- with one exception: Chinese fabless semiconductor manufacturer Vimicro International.
Deja vu all over again
If you're getting the feeling you've read this column before, you're not alone. I'm getting a strong sensation that I wrote this column last week, when our four-star standout was yet another "China-based fabless semiconductor maker" -- Actions Semiconductor (Nasdaq: ACTS). Hmm. Looks like these birds of a feather are dropping like rocks together.
The bull case for Vimicro
But CAPS investors ain't scared, not one little bit. Like Actions, Vimicro gets high marks from the CAPS community, with 143 out of 149 investors polled giving it the thumbs-up, including 47 out of 49 All-Star players. Here's why:
- CAPS All-Star EverydayInvestor just plain likes the numbers. Specifically: "$70 million enterprise value (after accounting for $100 million in cash on books) and EV / earnings ratio of about 12, TTM."
- That's a sentiment shared by the Fool's own Tom Gardner, who wrote in September: "This Beijing-based semiconductor design company (fabless) has an excellent balance sheet, has been cut in half on earnings shortfalls, and is heavily owned by HSBC (a very solid investor/financier)." Tom continues, "This has the markings of a promising investment down below $11, back at the price it came public at around a year ago," before cautioning: "It's not the sort of situation I'd expect quick rewards from. But let's check back in three years, Fools."
By the way -- nice hedge, Tom. Vimicro is selling for $5 and change today! Eight months down, 28 to go ...
Time to chime in
Before I get myself in too much trouble with the boss, maybe it's time to draw this column to a close. But before I do that, let me extend an invitation -- or maybe more of a challenge -- to you, the reader.
We know you're "smarter than a fifth-grader" (TM), but are you smarter than the man who's outperformed the S&P 500 by 35 points during his tenure at Motley Fool Stock Advisor? If so, then step up! Click on over to CAPS, vote against Vimicro, and prove Tom wrong. Or ride the coattails of the master investor, and watch your rating soar as the company outperforms the market ... from a cost basis less than half what Tom "paid" for it. Either way, you've got nothing to lose. It's only virtual money.
What's more, if you'll take a moment to click through this link, you've got something to gain as well -- a free one-month trial to Motley Fool Stock Advisor, yours for the taking.
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 ranked No. 1,291 out of nearly 29,000 rated investors. The Fool has a disclosure policy.
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