5 Drop-Dead Gorgeous Stocks

"The idea of buying a former superstar stock at a discount price certainly has its attractions, but you've got to make sure you catch the haft -- not the blade."

So goes the thesis of my weekly Fool.com column "Get Ready for the Bounce." Therein, I run the 52-week-lows list compiled by Nasdaq.com through the "wisdom of crowds" meter that we call Motley Fool CAPS. And out the other end comes a list of stocks that have fallen so far, Foolish investors figure they're just bound to bounce back soon.

But is there a way to cash in on fallen angels who've plummeted even further? Perhaps. If a stock that's fallen for one year straight has headroom, then maybe a stock that's fallen even farther, and longer, has room to soar back even higher -- in which case, an apparently left-for-dead stock could offer us a drop-dead gorgeous entry price. We're going to test that thesis today, starting with five stocks that just hit their 5-year lows:

	Recent Price	CAPS Rating (5 max):
Penson Worldwide  (Nasdaq: PNSN)	$12.40	****
Cowen Group  (Nasdaq: COWN)	$7.48	**
Colonial Bancgroup  (NYSE: CNB)	$7.32	*
First Horizon National  (NYSE: FHN)	$9.94	*
FBR Capital Markets  (Nasdaq: FBCM)	$5.19	*

Companies are selected from the "New 5-Year Lows" list published on MSN Money on Thursday. CAPS ratings from Motley Fool CAPS.

Left for dead? Or drop-dead gorgeous?
Each of these stocks has shed between 55% and 75% of its market cap in just the past year. Wall Street's left 'em for dead, and Main Street investors greet them with all the affection ordinarily reserved for roadkill -- all of them but one, that is.

Penson Worldwide's stock has actually perked up over the past two months, and it looks like investors may once again be warming to this provider of trade execution, clearing, settlement, and related services to the securities industry. Let's find out why as we examine ...

The bull case for Penson Worldwide
NetscribeFinancl introduced us to the company early last year: 

Penson Worldwide [provides] ... securities and futures clearing, margin lending, facilities management, technology and other related offerings to broker-dealers, hedge funds, banks and financial technology firms. Its principal clients are online, direct access, retail brokers, banks, institutional brokers, financial technology companies and securities exchanges. Company's revenue model of clearing services is on a variable cost structure based on transaction volume and providing an integration of front, middle and back office systems while allowing near real time updating of account status and margin balances.

According to NetscribeFinancl, Penson gets the bulk of its revenue from interest earned on funds while they're in its possession, with clearing operations providing another large chunk of revenue.

Penson doesn't have a really long track record as a public company, however, which may help to explain why Wall Street lacks confidence in it. Last April, CAPS All-Star sojournerks called Penson a: "Relatively new IPO not followed by many." (Hmm. Popular, small-cap growth stock, relatively unfollowed on Wall Street? Sounds like Penson may fall within the ambit of a certain Fool newsletter that I know.)

And we wrap up with a November pitch from RubiconJohn, who argued at the time that Penson was "dirt cheap right now, since it has been taking a beating from the other firms in the financial industry."

Dirt cheap? Really? Penson competes in a market dominated by giants. Its key competitors include divisions of both Merrill Lynch (NYSE: MER) and Goldman Sachs (NYSE: GS). But while you might expect a bit player in this market to carry a valuation lower than what's accorded to better known, and presumably more stable rivals, the truth is that Penson gets discounted very little relative to its "peers." Based on forward earnings estimates, Penson carries a P/E of 9.7 -- slightly higher than Goldman's 9.3, and only a bit cheaper than Merrill's 10.3. What's more, Penson is pegged as the slowest growing of the three, with most analysts predicting only about a 10% growth rate for the little guy.

To me, though, that looks like at best a fair valuation. I fear that the stock's 51% run-up since bottoming out in mid-March means we've missed the boat on Penson. Pity I didn't start this column two months ago, but perhaps we'll have better luck next week.

Time to chime in
Of course, the aim of this column isn't just to tell you what I think about Penson Worldwide -- or even what other CAPS players are saying. We really want to hear your thoughts. Has the run-up sucked up all the profits to be had, or does Penson still have room to run? Click on over to Motley Fool CAPS and tell us what you think.