Get Ready for the Bounce

"Don't catch a falling knife." Thus commandeth the old saw (to mix a cutlery metaphor).

But if people weren't tempted to catch cutlery in the first place, there'd be no need for this little bit of investing wisdom, would there? The idea of buying a former highflier at a discount price certainly has its attractions. The trick, of course, is to increase the odds that when you make your grab, you're catching haft, not blade. That's where we come in.

In The Motley Fool's continuing effort to keep your investing dollars safe, today we once again assume our position beneath Mr. Market's silverware drawer. As the knives plummet, we'll measure who's fallen the farthest. Then we'll head over to Motley Fool CAPS and ask which of these stocks -- if any -- Foolish investors think are ready to rebound to new highs.

With that said, let's meet today's list of contenders, drawn from the latest "52-week lows list" at MSN Money:

Company

52-Week
High

Currently
Fetching

CAPS
Rating
(5 stars max)

Online Resources (Nasdaq: ORCC  )

$ 14.11

$9.41

****

Radyne (Nasdaq: RADN  )

$ 17.85

$9.56

****

Achillion Pharmaceuticals (Nasdaq: ACHN  )

$17.58

$8.79

**

Access Integrated Technologies (Nasdaq: AIXD  )

$14.73

$7.49

**

Companies are selected from the "New 52-Week Lows" list published on MSN Money on the Saturday following close of trading last week. Current and 52-week-high pricing provided by Yahoo! Finance. CAPS ratings from Motley Fool CAPS.

Knives and knaves
As you can see, our fellow investors over on CAPS aren't terribly enamored of this lot. The vast majority of the stocks on MSN's "shot" list don't even have CAPS ratings, being too small and too illiquid to merit inclusion in our service. Of the few that did make the initial cut, half receive below-average ratings of just two stars. Just two companies earn an above-average rating this week: satellite communications equipment maker Radyne, and online banking and bill-pay facilitator Online Resources.

Ready to bounce?
Which one will we look at today? Well, I see little point in discussing Radyne. The stock has been an active recommendation of the Motley Fool Hidden Gems small-cap investing service for more than three years (and counting). Anything I could tell you about the company, the Gems team can tell you better and, in fact, already has told you better. Suffice it to say we recommended the stock in January 2004, and over three years of ups and downs, it's still beating the market.

Instead, today let's check out Online Resources, a local D.C.-area company that my Foolish colleague Nathan Parmelee and I visited a couple of years back. It's one of the few remaining standalone players in the online banking space, with Intuit (Nasdaq: INTU  ) having eaten Digital Insight last year, and CheckFree (Nasdaq: CKFR  ) having just gobbled up Corillian (Nasdaq: CORI  ) . Here's what our CAPS investors have to say about the survivor:

  • TechnicalTommy -- who, I'm guessing, takes a technical approach to his stock picks -- observes that Online Resources is at "yearly lows with interest coming into the stock."
  • Another All-Star, ABendall, came across the company while seeking out "companies with similar characteristics to [Hidden Gems recommendation] CTrip," and then checking their valuation against a discounted cash flow analysis and recommending them "if the valuation was reasonable." Says ABendall: "This was one of the stocks that filled this criteria."
  • And wouldn't you know it? I, too, have posted a CAPS write-up on Online Resources: "Online Resources helps banks and credit unions offer online banking and bill pay to their customers. Its recent acquisition of Princeton eCom, although at a less-than-attractive price, puts it in the position of 'service provider' to many of its rivals in the online banking software space. Like other companies in the industry, Online Resources has suffered from fears that online bill-pay adoption is slowing. Its stock price may also be quite volatile in the months ahead, as it takes non-cash charges to earnings to account for the goodwill portion of its eCom purchase. Buy on the dips."

Hmm. At this point, I should probably point out that I predicted back in August 2006 that Online Resources would outperform the market -- and the stock has done the exact opposite, lagging the S&P by a good 20 percentage points. Shows you how much I know!

Can you do better? Then step up to the plate and make your call. At Motley Fool CAPS, it doesn't matter whether you've got a "TMF" in front of your name, or a "CFA" behind it. Unlike Wall Street, we welcome all comments on CAPS, where the best arguments -- and the best records -- carry the day.

Fool contributor Rich Smith does not own shares of any company named above. You can find him on CAPS, publicly pontificating under the handle TMFDitty, where he's currently ranked 34 out of nearly 23,000 raters. The Fool has a disclosure policy.


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