Get Ready for the Bounce

"Don't try to catch a falling knife," the old saw commands. (Pardon my mixed cutlery metaphor.)

The idea of buying a former superstar stock at a discount price has its attractions, but you've got to make sure you catch the haft -- not the blade. That's where Motley Fool CAPS comes in.

Today, we once again stand beneath Mr. Market's silverware drawer, measuring how far some knives have fallen. Then we'll call on CAPS to ask which -- if any -- of these stocks Foolish investors think are ready for a rebound. Let's meet today's list of contenders, drawn from the latest 52 Week Lows list at Nasdaq.com:

Companies are selected from the Nasdaq 52 Week Low list published on Nasdaq.com on the Saturday following close of trading last week. 52-week high and current pricing provided by Yahoo! Finance, as of the same date. CAPS ratings from Motley Fool CAPS.

On Friday, no fewer than 406 listings on the NYSE hit their 52-week lows. That's more than one of every nine securities trading on the Big Board. It's a mess out there, no doubt.

But if there's one good thing about a broad-based market sell-off, it's that you find a lot of terrific companies getting the ol' baby 'n' bathwater treatment. Tossed out on their rosy little bums as if they were bums of another sort. You know -- just know -- that some of these babies are gonna bounce right back once the suds subside.

Case in point: Look at the companies on today's list. Stand-out, name-brand firms, every one. I have little doubt we'll find a winner here. Granted, Fools aren't enthusiastic about Ford and its declining market share, or buyout artist Blackstone, here at the tail end of the buyout boom. But Toyota? Didn't these guys just steal Ford's title as the second-biggest car company in the U.S.? And aren't they neck and neck with General Motors (NYSE: GM) for the title of No. 1, worldwide? Ladies, and gentle-Fools, I have no doubt that we've found our bouncer.

The bull case for Toyota Motor
And more than 2,300 CAPS players agree, including nearly 700 of our All-Star players. Here's what they have to say about the company:

Perpetual CAPS star TMFEldrehad opines:

Hybrids face none of the infrastructure challenges that are going to doom fuel cells, and when it comes to ethanol, it currently takes nearly as much energy to produce ethanol (including the energy needed to farm and manufacture fertilizers) as is produced when the ethanol is eventually combusted. Hybrids, however, have advantages on both fronts - and frankly I think the whole idea of regenerative [braking] is simply brilliant. Hybrids can leverage the existing infrastructure, and actually reduce overall energy consumption needs. Furthermore, hybrid technology is still in the very early stages and I expect greater and greater effeciency from this technology into the future. I'm long on Toyota here (and also long on [Honda (NYSE: HMC)]) because of their leadership in the hybrid automobile market.

Now that Eldrehad has addressed the fuel efficiency angle, we turn to TMFMoby for a few words on quality, dependability ... and PR:

[W]henever you see a news report of the Middle East, or South Asia. What kind of vehicles are the regular-folk in? Usually Toyota pickup trucks. ... Why so many Toyotas? ... [T]hey're cheap, available, and most importantly durable. As the emerging markets do their thing, Toyota will be the car of choice. Toyota has also done a great job as branding (and being) an American company. A $500M plant in Alabama and a $5.3B one in Kentucky will do that for you.

And finally, let's turn to fellow CAPS All-Star tramagli for a few words on Toyota's wild-card technology: "Not only does Toyota manufacture automobiles efficiently, they're involved in technologies such as robotics, which I believe to be a large potential market."

So we can sum up the bull thesis on Toyota in four words: "$100 oil. Quality. Robots." And you get all that, in the form of the world's dominant carmaker, at a price of less than 10 times earnings.

Of course, there are caveats. For one thing, as big as it is already, Toyota doesn't come with a whole lot of growth potential in its standard options package; analysts only expect this giant to grow at about 8% per year over the next half decade. Also, Toyota carries heavy capital investment obligations. The firm hasn't generated free cash flow in excess of net income for at least the past dozen years, and often, even as it's reporting profits under GAAP, it winds up burning cash on the cash flow statement. I can't say as I'm thrilled with those options.

Time to chime in
The aim of this column isn't just to tell you what I think about Toyota -- or even what other CAPS players say. We also want to hear your thoughts. Do Toyota's cash "issues" concern you? Or can you look past them if it means getting a chance to buy the world's dominant carmaker at a low point in its stock price? Click on over to Motley Fool CAPS and tell us what you think.

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