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"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 have to make sure you catch the haft -- not the blade. That's where Motley Fool CAPS comes in.

It's been a while, but thanks to last week's sell-off, we once again have a chance to stand beneath Mr. Market's silverware drawer in hopes of snagging a bargain. Let's meet today's contenders.


52-Week High

Recent Price

CAPS Rating (out of 5)

Forest Oil (NYSE: FST  ) $40.23 $23.74 ****
Allied Irish Banks (NYSE: AIB  ) $13.65 $1.78 ***
Cree (Nasdaq: CREE  ) $76.14 $32.23 ***
Motorola Mobility (NYSE: MMI  ) $36.54 $21.64 **

Companies selected from the list of stocks hitting new 52-week lows as reported on Recent price and 52-week high provided by Yahoo! Finance. CAPS ratings from Motley Fool CAPS.

The week in weak stocks
Friday's anemic jobs report notwithstanding, last week was a good one for stocks. Among companies of decent size (mid-caps and up), only the four names you see listed above hit new 52-week lows. This good news for shareholders does pose new buyers a dilemma, however, because we've been given a pretty shallow pool in which to fish for our next big bouncer. Whom will it be?

Forest Oil, perhaps? At four CAPS stars, it's clearly the crowd favorite this week. But after watching Forest falter on its preliminary Q2 earnings report Thursday, and then reviewing the company's cash-flow statement and discovering that Forest has generated positive annual free cash flow only once in the past 20 years, I'm afraid I just don't share my fellow Fools' optimism about that one. I know, I know -- oil's a capital-intensive business. But tell that to Exxon Mobil (NYSE: XOM  ) , which churned out $24 billion in free cash flow last year.

How about Allied Irish, then? I suppose it could be a winner -- if the contest were to see which bank was most likely to go bankrupt when Europe defaults.

Cree? It got a bit of good news this week, when, after months of speculation, General Electric (NYSE: GE  ) confirmed that it is indeed using Cree's technology in its new 60-watt LED light bulb. But I've made my opinion of Cree known for some time now. Until the company shows itself capable of generating greater free cash from its business, I'm not buying in.

No, Fools. When you get right down to it, there's only one stock on today's list that appeals to me. Surprisingly, it's also the stock that investors hate most.

Motorola Mobility
Last month, analysts dueled over Motorola's prospects, with Gabelli calling the stock "a formidable player in Android-based smartphones and tablets," and BMO Capital Markets saying the exact opposite. As CAPS All-Star eksummers620 noted on June 22, Motorola got "downgraded Tuesday by BMO Capital Markets analyst Tim Long, who reasons that growing smartphone competition will weigh on the company's results."

If you're looking for a tiebreaker, though, fellow Fool (and All-Star investor) TMFDeej cited a third report in May, this time from Goldman Sachs:

According to Goldman, [Motorola Mobility] is cheap on a sum-of-the-parts basis. It currently trades at just under $25/share and has … $8 per share in deferred tax assets … $11 per share in cash … $3 to $4 per share for set-top box business. This adds up to $22 to $23/share, meaning that investors are essentially getting the company's handset business for free.

Free is good
Of course, if Mr. Market is valuing Motorola's cell-phone business at $0, the question remains: Is it worth any more than that? Call me an optimist, call me a Fool, but I'm pretty sure it is.

Oh, I know that Apple and its iPhone are the best thing since sliced semiconductors. Fact is, I like Apple's stock a lot -- but I also like Motorola. The stock carries a lofty, triple-digit P/E post-spinoff, but if you can look past the P/E, I think you'll like what you see:

  • $513 million in annual free cash flow, enough cash profit to give the stock a price-to-free cash flow ratio of only 12.4.
  • $3 billion in net cash -- nearly half the stock's market cap.
  • As a result of that cash, a drool-inducing enterprise value-to-free cash flow ratio of just 6.5.
  • And to top it all off, consensus growth estimates of 13% annually for the next five years.

To my Foolish eye, that all adds up to a pretty compelling bargain in Motorola Mobility stock. Two-star-rated it might be, but Motorola looks like a winner to me.

Does it look that way to you? Bull or bear, we want to hear what you think about the company. Head over to Motley Fool CAPS now, and tell us what you think about Motorola Mobility.

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