"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 looking to bag a bargain, a panicked sell-off by jittery investors offers you 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 picks, we'll check them against the collective intelligence of Motley Fool CAPS.
Today's contenders include:
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Recent Price
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CAPS Rating (out of 5):
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Internet Initiative Japan (Nasdaq: IIJI )
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$6.44
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*****
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Hansen Medical (Nasdaq: HNSN )
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$12.32
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****
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American Superconductor (Nasdaq: AMSC )
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$23.95
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**
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UTStarcom (Nasdaq: UTSI )
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$3.30
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**
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Internap Network Services (Nasdaq: INAP )
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$3.09
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**
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Companies are selected from the "Institutional Ownership Down Last Month" list published on MSN Money on the Saturday following close of trading last week. Recent price provided by Yahoo! Finance. CAPS ratings from Motley Fool CAPS.
For the most part, we mere mortal investors agree with the Wall Street demigods this week. The majority of the stocks that they're selling, we're not feeling too confident about either.
But there are two exceptions: Rule Breakers recommendation Hansen Medical (brought to you by the makers of Rule Breakers recommendation Intuitive Surgical (Nasdaq: ISRG ) , natch), and the intriguingly named "Internet Initiative Japan." Both receive above-average ratings on CAPS, but the latter is the one getting top marks, so that's the one we'll be looking at today:
The bull case for Internet Initiative Japan:
- seavirostek introduced us to the company in May: "Internet Japan Initiative ... is a leading network solutions and Internet access provider in Japan. Recently added a wholly owned subsidiary dedicated to print-on-demand services targeted for the financial industry. This multifunction printer platform will allow members to reduce costs for storing, revising, distributing documentation."
- MsUsed wrote a few days later: "Technology and Japan go hand in hand perfectly...almost like peanut butter and jelly. Anyway, I can see this company being very profitable in the future as technology expands its horizons. The numbers look good and solid growth is in their future."
- I'm not sure about the peanut butter-and-jelly analogy there. Seems to me that "rice and raw fishies" would be more apropos, but the basic sentiment seems popular. daisychain144 echoed MsUsed late in 2007: "Japan is an innovator and a serious problem solver. Their is real substance to their pitch."
Few would argue that Japan is anything other than the Epicenter of Tech. But even conceding that, I'm still not quite clear on exactly what it is that IIJ does. Let's see if management can clarify: "Founded in 1992, Internet Initiative Japan ... has built one of the largest Internet backbone networks in Japan, and between Japan and the United States ... The company's services include high-quality systems integration and security services, Internet access, hosting/housing, and content design."
Ah, I see. So basically, IIJ is a rival to Nippon Telegraph & Telephone (NYSE: NTT ) . A bit of an upstart, though, which has both good and bad aspects. The good -- IIJ is growing at a decent clip, with revenue up 19% in the most recent quarter. The bad -- it's not nearly as profitable, grossing only about a third as much profit from each dollar of revenue as does NTT.
Time to chime in
Does growth combined with low profit margins make IIJ a better deal at 12.2 times earnings than NTT is at 5.6? I honestly don't know enough about either company to hazard a guess.
But perhaps you do? If so, then please enlighten us. Take a few moments to post your pitch on Motley Fool CAPS, and tell the world what you know about Internet Initiative Japan.
Motley Fool CAPS: It's fun, it's free, and it just might make you famous.
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