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 furthest. 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 Low" list at Nasdaq.com:

52-Week High

Currently Fetching

CAPS Rating

Trimble Navigation (NASDAQ:TRMB)

$43.10

$41.55

*****

Stericycle  (NASDAQ:SRCL)

$58.68

$55.44

*****

Community Health Systems (NYSE:CYH)

$44.50

$29.06

****

Volvo (NASDAQ:VOLV)

$22.93

$19.46

****

Companies are selected from the "NASDAQ 52 Week Low" list published on Nasdaq.com 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
What is this, opposite day? Or has the universe simply gone off its rocker? Whatever the answer, one thing's certain: There's an awful lot of very well-respected stocks on sale this week. I was able to fill up today's list of stocks hitting 52-week lows with nothing but companies earning above-average four- or five-star ratings on CAPS. While that's bad news for me, complicating the task of picking a winner from this field of candidates, it's good news for investors, who have multiple bargains to choose from.

So which stock shall I profile today? I'm going with the highest-rated of the two five-star stocks on today's list: GPS specialist Trimble Navigation, which provides "advanced positioning product solutions" that help companies and governments position their assets to best suppress operational costs and enhance productivity.

Of the 238 CAPS investors who've surveyed Trimble, 234 like what they see. And what is it that they see? We're about to find out, as we review...

The bull case for Trimble Navigation

  • Why buys Trimble? CAPS All-Star joel415 tells us that: "Compared to [Garmin (Nasdaq: GRMN  ) ], it doesn't get that much press. ... Instead of concentrating on the somewhat unreliable trends of the electronics industry (like GRMN), Trimble has turned its GPS IP and products into a solutions company. It offers total solutions to farmers and the construction industry that allow them to use location based services to speed up their work, save material costs, automate the work of heavy equipment etc. They even own one of the main producers of surveying equipment, which ties in very well with the GPS construction area. Trimble has identified a few other vertical areas to work in too. Once entrenched in these areas, Trimble is not going to have much competition. It may not grow as fast as GRMN, but I think it has a far higher moat."
  • Fellow All-Star scosol agrees: "As GPS becomes more ubiquitous, it becomes less about devices (Garmin), and more about the chipsets (Trimble). Also, Trimble has its hooks into a lot of diverse industries."
  • phwting also likes Trimble's client list, observing that this "profitable GPS location solution provider ... licenses to [Nokia (NYSE: NOK  ) and Qualcomm (Nasdaq: QCOM  ) ] for cell phone-based location [services]."

Reviewing the comments, I admit I'm intrigued by Trimble -- but not convinced. Quite simply, after reviewing the company's financials, I suspect this one may have further to fall. Analysts who cover Trimble believe it can grow its profits at about 15% per year over the next five years, yet the company sells for 44 times trailing earnings. The resulting PEG of nearly 3.0 tells me that "high moat" or no (and correct me if I'm wrong, but don't you want moats to be deep rather than high?), this stock's too pricey by far.

Time to chime in
Of course, the aim of this column isn't just to tell you what I think about Trimble -- or even what other CAPS players are saying. We also want to hear your thoughts on Trimble. Is it really a better bargain than Garmin, a stock that we've recommended in Motley Fool Stock Advisor? Take a free trial of the newsletter, and you can read Fool co-founder David Gardner's write-up on that stock -- which I should perhaps mention has more than tripled in value since David picked it two years ago. Compare Garmin to Trimble and tell us which one you think is the better investment.


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