Get Ready for the Bounce

"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 has its attractions, but you have 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 to measure which knives have fallen the farthest. Then we'll call on CAPS to ask which of these stocks -- if any -- Foolish investors believe are ready for a rebound. Let's meet today's list of contenders, drawn from the latest "52-Week Lows" list at Nasdaq.com:

Company

52-Week High

Recent Price

CAPS Rating (5 Max):

ONEOK  (NYSE: OKE  )

$52.16

$42.15

*****

Mitsui (Nasdaq: MITSY  )

$540.69

$315.75

****

Horsehead Holding  (Nasdaq: ZINC  )

$26.14

$7.75

****

Mitsubishi UFJ  (NYSE: MTU  )

$11.22

$7.33

***

K-SEA Transportation  (NYSE: KSP  )

$42.98

$24.97

***

Companies are selected from the "NASDAQ 52-Week Low" list published on Nasdaq.com on the Saturday following close of trading last week. Recent price and 52-week high from Yahoo! Finance. CAPS ratings from Motley Fool CAPS.

Knives and knaves
One good thing about a broad-based market sell-off is 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.

CAPS members see three likely suspects on today's list, but although Mitsui and Horsehead Holding deserve props for their four-star ratings, it's Motley Fool Income Investor recommendation ONEOK that claims the prize, and CAPS's coveted top-honor -- a full five stars. What has investors feeling high on this natural-gas distributor? We're about to find out, as we delve into ...

The bull case for ONEOK
CAPS All-Star NtscrbEnergy introduced us to ONEOK last summer:

Good times ahead for ONEOK, as its organic and inorganic growth strategy showed signs of paying-off. The company purchased the remaining general partner stake of Oneok Partners LP and sold its midstream natural gas assets to the partnership, thus leveraging claim on the master limited partnership's future distributions. ... With positive industry synergies, organic growth projects and higher expected earnings from partnership business, ONEOK represents a good investment opportunity.

Way back in November 2006, wodaman called ONEOK the "Cisco (Nasdaq: CSCO  ) of NG." OK … I think that's supposed to be a compliment, but I'm not quite sure. Is wodaman telling us to buy ONEOK for its expertise in big bath accounting, copious issuance of stock options, and continued refusal to pay a dividend?

Hardly. As CAPS All-Star 50day wrote a month later:

What I picture is a bunch of old school business men that don't monkey around with the company's or the [stockholders'] money. No fat stock options deals, no cooking of the books, and no bull. All business. Plus we're paid a nice dividend to hold the stock.

Ah. Well, Cisco it ain't, but it'll do in a pinch. And at least 50day is right about the dividend. ONEOK pays its shareholders a respectable yield of 3.7%. That helps to make up for the company's price-to-earnings ratio of 15, which doesn't look particularly value-priced relative to its 9% projected long-term growth rate.

Also good to know is that ONEOK is a better deal than most companies operating in the gas-utility industry. Its P/E is slightly cheaper than the norm for gas utilities, while its growth rate is a bit faster -- much faster, in fact, than peers such as OGE Energy, Atmos Energy, or Dynegy (NYSE: DYN  ) .

No, ONEOK isn't the most exciting company. If you love excitement, hate dividends, don't mind a little stock dilution, and enjoy "interesting" accounting -- then Cisco may be the better choice for you. But within the humdrum domain of gas utilities, ONEOK's a contender.

Time to chime in
Of course, the aim of this column isn't just to tell you what I think about ONEOK -- or even what other CAPS members are saying. We want to hear your thoughts. Head over to Motley Fool CAPS, and tell us what you think.

Motley Fool CAPS: It's fun, it's free, and it just might make you famous.

Fool contributor Rich Smith owns no shares of any company named above. You can find him on CAPS, pontificating under the handle TMFDitty, where he's ranked No. 394 out of more than 115,000 players. ONEOK is a Motley Fool Income Investor recommendation. The Fool has a disclosure policy.


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