Contrarian Shopping List

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

Of all the Oracle of Omaha's orations, this one holds a special place in Foolish investors' hearts. When looking to bag a bargain, a panicked sell-off by jittery investors offers you a great chance to snap up stocks on the cheap.

In the short term, professional traders' pessimism can become a self-fulfilling prophecy. Desperate institutions lower their asking prices to get rid of a stock, prompting buyers' bid prices to fall in tandem, creating the very price decline that both sides feared in the first place -- until the selling stops.

Until it does, savvy investors can "get greedy," snapping up bargains from these fearful sellers. (Assuming they really are bargains.) In today's column, we'll see which stocks Wall Street's motivated sellers are most frantic to unload. Once we've compiled this shopping list of potential contrarian picks, we'll check them against the collective intelligence of Motley Fool CAPS.

Today's contenders include:

Huh. So it seems we mere mortal investors agree with the Wall Street demigods this week -- not a single stock on the Wise Men's sell list gets so much as a half-hearted three-star endorsement on CAPS.

Faced as we are with a situation where no obvious contrarian plays present themselves, this week we're going to do something really contrarian. We're going to profile a one-star rated stock that, while panned by Wall Street, was praised by Wall Street's hometown newspaper, The Wall Street Journal, as a potential takeover target last week.

Yes, Fools, read on, if you dare, as we brave the twin storms of high gasoline prices and a slowing economy to consider whether RV-maker Monaco Coach might be a "buy."

The bull case for Monaco Coach

• JJVA219 summed up the bull thesis on Monaco for us way back in September 2006: "Demographics: 55-64 year olds will increase 45% in the next 10 years. That's who buys RVs. Interest rates have leveled off. Fuel prices aren't as important as believed, since the typical RV is driven fewer than 5000 miles a year."
• That sentiment was echoed one year later by unluckyguesser: "Monaco has acquired other coach manufacturers and is capturing market share of premium RV's. As Baby Boomers retire, I think this company will prosper."
• And again six months later (earlier this spring for those keeping count) by Pablocruz, who also writes: "baby boomer's still want the American dream. They make low end R.V.'s & high-end. Both markets will surprise investors."

But so far, it's the Monaco bulls who have been surprised -- with market underperformance totaling 55, 48, and 47 points, respectively, for the three pitchers named above. Could today be the time for Monaco to shine? After all, Warren Buffett's Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B) has been investing in manufactured homemakers -- and the main difference between those and RVs is that one's got wheels and the other doesn't. And over at Motley Fool Hidden Gems, we, too, have placed bets on the demographic trend, in the form of a recommendation of RV parts maker Drew Industries (NYSE: DW). Could The Wall Street Journal be on to something here?

One word: No
The way I see it, the "wisdom of crowds" is dead right on Monaco, and the Journal is dead wrong. For one thing, in the article mentioned, the Journal's stock screen relied on obsolete information in recommending Monaco. According to the article in question, Monaco generated $29.5 million in free cash flow last year. Which is true, as far as it goes. However, over the last 12 months, the company's free cash flow spigot got switched abruptly off, and at last report, Monaco has burned through $39.9 million in free cash flow over its past four quarters.

So forgive me for being contrary, Journal, but I'm going with the (lack of free cash) flow on this one. Monaco Coach is not a stock I want to own.

Time to chime in
Of course, the aim of this column isn't just to tell you what I think about Monaco Coach -- or even what other CAPS players are saying. We really want to hear your thoughts. Click on over to Motley Fool CAPS and tell us what you think.

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

Drew Industries is a Motley Fool Hidden Gems pick, and Berkshire is one at both Inside Value and Stock Advisor. The Motley Fool owns shares of Berkshire. Try any or all of these with a complimentary 30-day trial.

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. 742 out of more than 100,000 players. The Fool has a disclosure policy.