Fearful Stocks for Greedy Investors

"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 -- and whether you should buy 'em:

Companies	Recent Price	CAPS Rating (out of 5)
Grupo Casa Saba SAB de CV  (NYSE: SAB  )	$14.59	*****
Dean Foods  (NYSE: DF  )	$14.86	***
Xenoport (Nasdaq: XNPT  )	$9.05	***
Energy Conversion  (Nasdaq: ENER  )	$7.65	***
Palm (Nasdaq: PALM  )	$9.11	*

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

Up on Wall Street, the pinstripe-and-wingtip crowd can't sell these stocks fast enough. Down here on Main Street, though... we're a bit more patient. A bit more willing to stop and think before making the trade on a disappointing stock.

Reviewing the five companies named above, Fools seem unsure what to make of milk magnate Dean Foods, biotech Xenoport, or solar-powered profit destroyer Energy Conversion Devices (which alongside fellow disappointment Evergreen Solar (Nasdaq: ESLR  ) , threw a long shadow over the solar industry earlier this month). We'll get back to you on those three a little later.

Fools have, however, reached a decision on two of these stocks. Based on its one-star rating, it appears Fools are finally waving goodbye to Palm. Conversely, they're giving Grupo Casa Saba a round of applause. Is this because the name rolls off the tongue so prettily, or is there a better reason to like the stock?

Let's find out.

The bull case for Grupo Casa Saba SAB de CV 
Perpetual CAPS All-Star mrindependent introduced us to Grupo Casa Saba back in September as a: "multi-channel, multi-product national wholesale distributor in Mexico. The Company distributes pharmaceutical products, health, beauty aids and consumer goods, general merchandise, publications and other products. This large-cap company consistently increases revenues and maintains high returns on equity (over 16%). Currently selling for just over book value, this company appears to be undervalued."

Fellow CAPS member tonyhamm02 adds that Grupo-C boasts a: "Committed owner," and a long history. The "coampany [has] been around since 1900, and in good supply chain with good business in growing market."

So 110 years and still going strong. Impressive. But what does the next century hold for Grupo-C? Back in June, cdubbies argued that: "Generic pharma should be a strong industry in tough economic times and this company has little competition in an emerging market, causing it's profitability to be double the industry standard."

Twice nothing ...
Unfortunately, "twice nothing is still nothing." Grupo Casa Saba may be twice as profitable as the average company in its industry, but it still earned just $42 million in profits over the last 12 months.

Of course, with a market cap of just $528 million, that's still enough loot to give the stock a low P/E ratio of 12.5. The question is: Is that cheap enough to justify buying Grupo-C rather than, say, U.S. analog Cardinal Health (NYSE: CAH  ) ?

The answer is: I don't know. It really depends on how fast Grupo-C can return to its profitability of yesteryear. Historically, the company has tended to earn somewhere between $60 million and $80 million from its business. If it can do this again, then I have to say that the resulting single-digit P/E would look most tempting.

On the other hand, Cardinal isn't all that much more expensive than Grupo-C today. Its 15.6 P/E isn't frighteningly high relative to projected 11.8% long-term earnings growth -- especially after you factor in the added benefit of a 2.1% dividend yield.

Time to chime in
When you get right down to it, I guess I see a fair amount of potential in both of these stocks -- but not enough to make me hit the "buy" button just yet. But I'm happy to be convinced. If you think there's a compelling buy-case to be made for Grupo-C -- or for Cardinal -- here's your chance to make your case. Click over to Motley Fool CAPS now, and sound off.

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