Get Ready for the Bounce

"Don't catch a falling knife," as the old saw commands. (Pardon my mixing a cutlery metaphor.) The idea of buying a former superstar stock at a discount price certainly has its attractions, but you've got to make sure you catch the haft -- not the blade. That's where Motley Fool CAPS comes in.

Today, we once again stand beneath Mr. Market's silverware drawer, measuring which knives have fallen furthest. Then we'll call on CAPS to ask which, if any, of these stocks Foolish investors think are ready for a rebound. Let's meet today's list of contenders, drawn from the latest 52-week lows list at Nasdaq.com:

 

52-Week
High

Recent
Price

CAPS Rating
(5 max):

Oshkosh  (NYSE: OSK  )

$65.83

$34.68

*****

Penn National Gaming  (Nasdaq: PENN  )

$62.30

$37.04

***

Pfizer  (NYSE: PFE  )

$26.15

$17.33

***

Sears Holdings  (Nasdaq: SHLD  )

$174.53

$74.75

**

General Motors  (NYSE: GM  )

$43.20

$13.79

*

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 recent prices provided by Yahoo! Finance. CAPS ratings from Motley Fool CAPS.

Knives and knaves
If there's one good thing about a broad-based market sell-off, it's that you find a lot of terrific companies getting the ol' baby 'n' bathwater treatment. You know -- just know -- that some of these babies are gonna bounce right back once the suds subside.

Case in point: Look at the companies on today's list. Name brands, every one. And yet, opinions on their prospects are all over the map. General Motors we hate (hey, don't blame the messenger). Pfizer, we can live with. And Oshkosh? Oshkosh, we love. (And here, I'm speaking both as messenger and message-giver; I own shares of the company myself.) What makes this manufacturer of armored trucks, cement mixers, and fire trucks so special? Let's find out, as we examine ...

The bull case for Oshkosh
WeeValue has the top-rated CAPS pitch on Oshkosh, penned back in March. Let's let him introduce the company:

Oshkosh Corp (formerly Oshkosh Truck), manufactures a variety of vehicles and lift trucks in the commercial, fire and emergency and government areas. Specifically ... [Oshkosh] manufactures waste disposal equipment, concrete mixers and tow trucks ... fire trucks, ambulances and snow removal trucks ... a variety of defense oriented heavy duty trucks and equipment. ... In December of 2006, Oshkosh purchased JLG industries -- a global manufacturer of aerial work platforms and telehandlers (those big forklift like trucks with a long telescoping boom).

Read the entire extensive examination of the company.

WeeValue isn't the only Fool saying "B'Gosh! I like this company!" CAPS All-Star BT310 quotes the company's CEO approvingly: "'Oshkosh is meeting weak market conditions head-on by investing in global initiatives to improve distribution in key international growth markets and reducing costs across all businesses. This permits us to maintain our positive outlook for fiscal 2008.'"

BT310 then proceeds to praise its:

Diesel-Hybrid Technology ... now being used in both new truck orders and the retrofitment of used vehicles. By improving fuel economy up to 20%, this technology gives them a market edge. The military has taken notice and is one of their best customers. I'm hoping this places them in an advantageous position when the new contract for Joint Light Tactical Vehicles is awarded.

And everyone from Boeing (NYSE: BA  ) to General Dynamics to Lockheed (NYSE: LMT  ) hopes the opposite.

Even if Oshkosh fails to snag the JLTV contract, though, fellow All-Star HistoricalPEGuy thinks this one's a buy:

Historical P/E ration at all time low. Growth seems to still be there, but I think many out there feel that municipalities don't have money to spend and that change in leadership in the U.S. will slash military spending. Still, this is just too cheap.

Can't argue with that -- I've written as much myself. Oshkosh sells for a mere nine times trailing earnings, which makes it quite a bargain if management can produce analysts' projected 21% earnings growth going forward.

No stock is perfect, and Oshkosh has one glaring problem that bears mentioning. The company took on a sizable slug of debt when it bought JLG Industries in late 2006. Much to my chagrin as a shareholder, Oshkosh is taking its sweet time about paying down its debt, with the result that as of this writing, the company carries a debt-to-equity ratio nearly twice that of rival Federal Signal, and almost four times that of Terex. Seems the stock will have a much better chance of bouncing if it can shed some of that burdensome debt.

Time to chime in
Does Oshkosh's debt worry you? How about the surprising lack of free cash flow in last quarter's report? Bulls and bears are equally welcome at Motley Fool CAPS -- tell us what you think.

Pfizer is a pick of both Motley Fool Income Investor and Inside Value. Sears was also chosen at Inside Value. Try either newsletter free for 30 days.

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. 1,855 out of more than 110,000 players. The Fool has a disclosure policy.


Read/Post Comments (1) | Recommend This Article (5)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 24, 2008, at 3:09 AM, jameskz28 wrote:

    If Rich Smith doesn't own any shares of any of the companies listed above (as the disclosure states), then why does he himself mention owning shares of OshKosh in the article? Foolish indeed.

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