Contrarian Shopping List

"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 you're looking to bag a bargain, a panicked sell-off by jittery investors offers 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. Once we've compiled this shopping list of potential contrarian picks, we'll check them against the collective intelligence of Motley Fool CAPS.

Today's contenders include:

Hmm. Seems Main Street is paralleling Wall Street sentiment this week, panning nearly every stock on today's Wall Street sell list -- with one exception. Israeli fabless semiconductor firm LanOptics defies negative Wall Street sentiment with its perfect five-star rating on CAPS. Let's find out why, as we examine ...

The bull case for LanOptics
CAPS newcomer Onisom enthuses:

LanOptics has been working its future with a very slow process of design wins that are a significant entry barrier for future competitors. Critical mass has been reached and all those design wins will translate in exponential sales and income growth in the next 2 years. Additionally, their latest announcement of geeting into the NPA market will expand their market sales potential at least 3 fold.

But it's not just newbies who like LanOptics. A couple of CAPS All-Stars started cheering more than a year ago. Back in September 2006, tponty predicted: "LNOP appears ready to start generating its first revenues from its NP-2 chip line, after several years of development. If the demands are great this stock will fly."

And, as scofflaw1 pointed out around the same time:

This company has no Wall Street coverage and virtually no institutional sponsorship. The company has secured major design wins at [Cisco (Nasdaq: CSCO), Juniper (Nasdaq: JNPR)], Ciena, Huawei and Nortel in addition to 20 other vendors. The company has been so successful in displacing in-house vendor ASIC solutions that it is now considered viral--winning multiple designs across business units.

Even if all that is true, though, contrarians be warned: This stock is for speculators only. It's profitless and burning cash, although it's true that LanOptics' revenues are growing by leaps and bounds. However, quarterly revenues still arrive in the form of single-digit millions, so the growth comes from a very small base. Before trying to get in on the ground floor of this one, you owe it to yourself to do some due diligence -- and find out whether a second floor even exists.

Time to chime in
Of course, this column's not solely designed to tell you what I think about LanOptics. We really want to know whether you see a future. If you've got an opinion, we've got a place to voice it.

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