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:

The problem with pessimism
The problem with going against the grain on Wall Street is that when professional traders get pessimistic, their grim outlook can become a self-fulfilling prophecy -- at least in the short term. The more desperate institutions become to abandon a stock, the lower the price they'll accept to get rid of it. And as their "ask" prices drop, the "bid" prices of buyers will fall in tandem, creating the very price decline they feared in the first place.

Until the selling stops.

In through the out door
When it will stop is anybody's guess. But until it does, savvy investors have a chance to "get greedy" and snap up some bargains from these fearful sellers (if bargains they truly be). And it seems that this week, investors believe "bargains be" in the stock of genetic tester Orchid Cellmark.

The bull case for Orchid
Ever wonder where the DNA evidence that exonerates a defendant in criminal court comes from? Or who runs the tests that decided the identity of Anna Nicole Smith's baby daddy? The answer is companies such as Orchid, which runs these and other genetic tests for government and private clients. It's a field of science that only seems likely to get bigger as time goes on, and 21 out of 23 Fools "polled" believe Orchid will profit from it. Of those who've encapsulated their opinions in pitch form:

• EclecticRecluse says the firm's current price of $5 and change is a "low price for sales."
• KansasGold observes that the firm recently "beat earnings and is beat down."

On the former comment, I note that Orchid does indeed sell at a discount to the price-to-sales ratio for its peers. Its current 2.5 P/S ratio is a far sight from the 9.2 ratio prevalent in the "diagnostic substances" industry. That said, the two firms that Yahoo! Finance says most directly compete with Orchid -- Commonwealth Biotechnologies (NASDAQ:CBTE) and LabCorp (NYSE:LH) -- trade at multiples cheaper than and equal to Orchid, respectively.

As for KansasGold's comments, I'm not quite sure which quarter is referred to, because Orchid only matched its sole analyst's earnings estimate in the most recent quarter. However, in each of the preceding three quarters, it beat estimates by significant margins. And the stock is certainly "beat down" -- down 27% from its April high, in fact.

Time to chime in
As you can see, this company remains relatively undiscovered, even on CAPS, where it tops today's "contrarian shopping list." Fewer than two dozen CAPS players have discovered Orchid, and fewer than 10% of these investors feel sufficiently knowledgeable about the company to frame an argument in its favor.

It's a good start, but I know we can do better. So I'd like to extend an open invitation today -- to you. Are you enamored of the company and its prospects? Then tell us. Does the firm's $10 million in annual negative free cash flow put you off? Tell us that, too. Either way, visit Motley Fool CAPS and let us know your thoughts on Orchid.

Motley Fool CAPS: It's fun, it's free, and it just might make you famous.

(Psst! By the way, if you like the industry but decide Orchid isn't for you, make sure to pick up a 30-day free trial to our Motley Fool Stock Advisor service on your way out. One of its competitors is actually a Stock Advisor recommendation.)

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 No. 1,493 out of more than 29,000 raters. LabCorp is a Stock Advisor recommendation. The Fool has a disclosure policy.