Get Ready for the Bounce

"Don't catch a falling knife." Thus commandeth the old saw (to mix a cutlery metaphor).

But if people weren't tempted to catch cutlery in the first place, there'd be no need for this little bit of investing wisdom, would there? The idea of buying a former highflier at a discount price certainly has its attractions. The trick, of course, is to increase the odds that when you make your grab, you're catching haft, not blade. That's where we come in.

In The Motley Fool's continuing effort to keep your investing dollars safe, today we once again assume our position beneath Mr. Market's silverware drawer. As the knives plummet, we'll measure who's fallen farthest. Then we'll head over to Motley Fool CAPS and ask which of these stocks Foolish investors think are ready to rebound to new highs -- if any.

With that said, let's meet today's list of contenders, drawn from the latest "52-week lows list" at MSN Money:

Knives and knaves
Hmm. We seem to be fresh out of bouncers this week. Might I interest you in a couple of flat tennis balls?

In addition to the three stocks making the list but receiving below-average star ratings, two companies get at least grudging approval from CAPS investors -- two companies whose lines of business couldn't be more different. Handleman, listed on the NYSE despite its micro-cap status, distributes music and video games. Fellow micro cap Panacos, more at home on the Naz, is an AIDS researcher. By far the more popular company, Panacos garners four times the interest of Handleman on CAPS -- and an official recommendation from Motley Fool Rule Breakers. Let's find out why.

Ready to bounce?

• cojonudo introduces us to Panacos: "This is a company that is not only offering a new anti-retroviral (ie, anti-HIV) drug, but one which represents a whole new CLASS of drugs and new WAY of attacking HIV. I love that the liquid form of the drug has been proven to be successful but the pill form has not. It offers us a brilliant buy opportunity right now. Worst case scenario, the drug will have to be sold in the liquid form. That may even come as a relief to many HIV-positive patients, who have to take a MULTITUDE of pills (and on a very strict schedule) -- you try taking 10 pills at one time, 3 times a day."
• The Fool's own TMFJake argues that recent "mixed phase II b trial results" do not justify the hit this company's stock price took in reaction, and that the "odds [are] too favorable to pass up."
• lbrules warns: "Panacos is mostly a 1 trick pony with HIV drug bevirmat [sic]." Even so, lbrules thinks: "Even with problems concerning pill formulation, this drug should be successful enough in liquid form to justify its current price."

Time to chime in
According to a recent update from the Foolish Rule Breakers team, Panacos is back in phase 2b trials with bevirimat -- so if the stock is indeed going to bounce, perhaps now is the time to get in on the action? CAPS investors remain ambivalent, and the fact that the company is down to less than two years' worth of cash (and counting) may have something to do with that.

So what do you think? Will Panacos prove to be a winner on the scale of Rule Breakers biotech picks such as Vertex (NASDAQ:VRTX) or InterMune (NASDAQ:ITMN) -- up 172% and 44% since recommendation, respectively? Or will it be forced to refinance, or burn its cash down to zero and die? Only one option seems good for shareholders. Come on over to CAPS and tell us which one you think it will be.

Oh, and if you're in the market for other biotech breakthroughs, don't pass up our trial offer on Rule Breakers. To read every recommendation we've made and get complete access to the site for 30 days free of charge, just click here.

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. 790 out of more than 50,000 players. The Fool has a disclosure policy.