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 the quadrillions of quotations quarried from that most loquacious of quotationists, this one holds a special place in the hearts of Foolish investors. Are you looking to "buy low" to later "sell high"? If so, your best chance of getting that initial low entry price comes when panicked sellers are unloading their shares at whatever price is on offer.

In today's column, we search the ranks of Wall Street's motivated sellers, noting which stocks they're most frantic to unload. Therein may lie the makings of a contrarian investor's shopping list. But don't just take my word for it. Before you decide to go in through Wall Street's out door, check your thinking against the collective intelligence of Motley Fool CAPS investors.

Today's contenders include:

Currently Fetching

CAPS Rating

NII Holdings  (NASDAQ:NIHD)

$59.63

****

AMIS Holdings  (NASDAQ:AMIS)

$7.55

**

BigBand Networks (NASDAQ:BBND)

$6.13

**

Nektar Therapeutics  (NASDAQ:NKTR)

$6.09

*

Countrywide Financial  (NYSE:CFC)

$17.30

*

Companies are selected from the "Institutional Ownership Down Last Month" list published on MSN Money on the Saturday following close of trading last week. Current pricing also provided by MSN Money on the same date. CAPS ratings from Motley Fool CAPS.

The problem with pessimism
The problem with going against the grain on Wall Street is that when professional traders get pessimistic, their grim outlook can become a self-fulfilling prophecy -- at least in the short term. The more that institutions become desperate to abandon a stock, the lower the price they'll accept to get rid of it. And as their "ask" prices drop, the "bid" prices of buyers will fall in tandem, creating the very price decline that they feared in the first place.

Until the selling stops.

Flashlights and sinkholes
When it will stop is anybody's guess. But until it does, savvy investors have a chance to "get greedy" and snap up some bargains from these fearful sellers (if bargains they truly be).

Sometimes, even the phrase "snap up" understates the speed at which a rebound can take place -- as in the case of Friday's one-day, 32% price spike at Countrywide. Other times, the process can take a bit longer. Either way, the aim of this column is to shine a flashlight down the market's sinkholes, in search of treasure buried below.

CAPS players have done just that with NII Holdings, the Southern-hemisphere purveyor of Motorola (NYSE: MOT  ) -based cell phone technology under the Nextel -- now Sprint Nextel (NYSE: S  ) -- brand name. They've found what looks to be a real bargain of a hypergrowth stock (at least, at first glance). Let's listen in.

The bull case for NII Holdings
sammyb9 introduces us to the company: "Formerly Nextel International and an [integrated] wireless communications provider principally in South America and Mexico."

nimistari gives NII Holdings an enthusiastic four thumbs up (from self and spouse):

NIHD rocks! Ok Ok I am partial to this company because it saves the wife and [me] mucho dinero. My wife is Peruvian and using Nextel's walkie-talkie type services she can talk daily to her friends and family in Peru. We live in Illinois! [It's] excellent, most of her Peruvian friends have switched over to Nextel. Many South Americans have family spread out all over the place. Nextel gives them an affordable way to communicate. Lots of [competition], Telefonica for example. But the walkie-talkie type service Nextel offers that lets you communicate perfectly from a continent away [truly] rocks. Great for business clients also.

And in what feels a lot like deja vu, lazykz provides this pitch:

Latin America cell phone penetration is about 40% compared to USA at 80% and Europe at 90%. Latin America expected to [double] over next 3-4 years. NIHD principal customer[s] are commercial and they get a premium price because of [Nextel's] multi-tasking capabilities.

Pinch me, Fool, because I think I'm dreaming. That last argument sounds like the Nextel I used to know -- back before Sprint bought and ruined it. But down south of the equator, NII seems to have escaped much of the carnage up north. Analysts expect NII to grow profits at an annual rate of 39% per year over the next five years -- making the firm's 31 P/E ratio look positively cheap.

The caveat: Rapidly growing, capital-intensive firms like NII often need to sink a lot of cash into growing their businesses. As profitable as NII looks under GAAP accounting standards, I have to point out that its free cash flow has run negative by $91 million over the last 12 months.

That alone is probably enough to scare me away from the investment -- but we're not here to discuss my paranoia today. What do you think about NII Holdings? Is it a keeper? Drop by CAPS today, and tell us what you think.


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