Fearful Stocks for Greedy Investors

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"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 picks, we'll check them against the collective intelligence of Motley Fool CAPS.

Today's contenders include:

Company	Recent Price	CAPS Rating (out of 5):
Gentiva Health Services  (Nasdaq: GTIV)	$15.58	*****
Republic Airways  (Nasdaq: RJET)	$5.09	**
JetBlue Airways  (Nasdaq: JBLU)	$4.20	**
Fortress Investment Group  (NYSE: FIG)	$4.05	**
Marshall & Ilsley (NYSE: MI)	$6.13	**

Companies are selected from the "Institutional Ownership Down Last Month" list published on MSN Money on the Saturday following close of trading last week. Recent price provided by Yahoo! Finance. CAPS ratings from Motley Fool CAPS.

Wall Street just can't wait to unload these stocks -- and can you blame them? Airlines have been routed by the sudden surge in fuel prices (yes, again). And the financial sector is, as always, in turmoil.

But down here on Main Street, while we generally agree with Wall Street's thinking on airlines and financials, Fools believe the traders are making a bad call on Gentiva Health Services. Let's find out why, as we review ...

The bull case for Gentiva Health Services

• Gentive bulls tend to fall in two camps on the stock. First, there are those who make the macro argument -- like CAPS All-Star JosephStalin (no, not that one), who argued last spring that Gentiva is a great way to play "the demographics of the baby boom generation. [Gentiva] stands to benefit from the vast increase of elderly and sick people in America." Or jclawsonPHN, who made nearly the same argument a year earlier: "This one is easy. More old people, more health problems causing greater need for health care at home. More demand=more work=more money."
• And then there are the number-crunchers. CAPS All-Star kevinottofro recently praised Gentiva's "[l]ow relative PE... PEG & 09 PE still below normal." And brandogy added that in addition to a low P/E, Gentiva boasts "low P/S, and low P/CF ratios. Additionally, it's low [debt/equity], Net Profit Margin ratios indicate that it's an undervalued company that is poised to grow over time w/ strong financial report."

So, it's a low-priced stock in an attractive and growing marketplace. Does it get any better than this?

Actually, it might. Fellow Fool Devon Rackle recently suggested that regulatory risks from the president's health-care reforms (which already have Aetna (NYSE: AET) and UnitedHealth Group (NYSE: UNH) investors hyperventilating into their surgical masks) explain the low prices on offer for Gentiva and its fellow home health-care providers. But as scary as President Obama may be to health-care investors, his proposals have had one beneficial effect: They've knocked Gentiva's stock price down so far that it's now practically screaming: "Buy me!"

And I'm not just talking about the 5.5 P/E. Turns out, Gentiva's almost as much of a bargain when valued on its actual free cash flow, which reached $64.5 million over the past 12 months. At this price, the enterprise is selling for 9.4 times free cash -- an absolute steal if the firm achieves its projected 17.2% annualized five-year growth rate.

Toss in the fact that Gentiva not only usually achieves such targets, but has in fact exceeded analyst expectations in each of the last four reported quarters, and this stock looks like a deal that's too good to last long.

Time to chime in
But hey, that's just my opinion. I could be wrong, and Wall Street could be right. So, what we'd really like to do now is hear what you think about Gentiva. Is this stock as good a deal as it looks, or is there good reason for Wall Street's fear? Click on over to Motley Fool CAPS and tell us what you think.

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