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

Wall Street vs. Main Street
Up on Wall Street, the pinstripe-and-wingtip crowd is unloading these stocks just as fast as they can. Down here on Main Street, though, each of these companies still has its fans.

For example, CAPS member FlyingSubmarine likes the fact that Canadian Solar carries: "Low debt for the solar sector." Rival photovoltaic module makers like Yingli (NYSE: YGE) and Suntech Power (NYSE: STP) carry higher debt loads, albeit on larger market caps. FlyingSubmarine also thinks Canadian Solar has "good management, good cost control, small P/E compared to the industry."

As far as Moody's goes, CAPS All-Star huddaman points out that: "Despite all the heat that rating agencies took recently ... these guys havent suffered a bit ... [Buffett] says, as a customer of these, he has no bargaining power. ... He thinks they need no capital. So it's a capital light model with unbelievable pricing power and power over customer."

But with unbelievable power comes unfathomable political risk, and judging from their CAPS ratings, it appears most CAPS investors are as loathe to touch Moody's stock as they are Canadian Solar. So who does the CAPS community support? ATP Oil & Gas, with a bullet.

The bull case for ATP Oil & Gas
ATP is a bit of an odd beast. With debt exceeding market cap by 50%, the company's significantly more leveraged than brand-name oil majors like ExxonMobil (NYSE: XOM) or Chevron (NYSE: CVX). But therein lies the opportunity, according to our CAPS crew of deep sea drillers. jag1003 notes that ATP got itself in its current debt fix by making significant investments to "double the capacity" of its production operations. Now that the investment has been made, though, "CAPEX starts to pay off now."

CAPS member WillSurfForFood notes that: "Management is projecting they will be producing 45,000 barrels of oil equivalent per day by the end of 2010 which is up significantly from the current 17,000. If they hit their milestones the value should at least double [to] $40 but if they don't there could be trouble due to the high level of debt."

DIRKVANDIJK agrees, predicting: "Huge increases in production coming from Telemark hub, should drive great earnigns in 2H and into 2011, Consuemsus looking for $5.23 next year. That puts this puppy at under 3x 2011 EPS!"

3x 2011 EPS!!!
Three times earnings? That deserves a whole lot more than one exclamation mark in my book. With Wall Street analysts projecting 2011 profit at nearly quadruple this year's profit, and five-year annualized growth estimates at 15% per year -- better than Chevron, and on par with Exxon -- you can see why so many Fools are so very, very bullish about ATP Oil & Gas. In fact, just a few months ago, my Foolish colleague Toby Shute laid out an argument for why ATP just might be the best stock for 2010.

And yet, might the price be too good to be true? After all, over the last four quarters ATP actually lost $49 million. Still, the company may have turned the corner in the latest quarter, with a meager profit. But many of the investors who know ATP well have raised serious concerns about the company's path to profitability.

Over on the Motley Fool's ATP Oil & Gas discussion board, for example, there's an active worry-fest under way. CryingofLot49 warns that as far as meeting its goals and fulfilling its promises goes, ATP has "never, ever done [that], not once." After laying out a string of reasons why ATP might be a bargain, and crunching the numbers thoroughly, this member concludes: "there's a reason the stock can't get above $24 the past 2 years -- and it's not because 'zomg no one on Wall St gets it!" and points to "$2bn in future spending in [Gulf of Mexico] and North Sea."

Time to chime in
Listen, Fools. "Three times earnings" tempts me as much as it does you. But the more I look at ATP Oil & Gas, the more the phrase "cheap for a reason" runs through my mind. Personally, I'd suggest treat this stock like you would a spreading oil slick: Keep your distance.

Of course, that's just my opinion. If you think I'm off base, click on over to Motley Fool CAPS right now, and tell me why I'm wrong.

ATP's stock price has more than doubled over the past year. But could it possibly be a value trap regardless? Find out here.