Fearful Stocks for Greedy Investors

"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

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, but in one notable case, we part ways. As the professionals sell off shares of GPS chipmaker SiRF Technology in a panic, CAPS players are happy to step in and take the other side of that trade.

Why are Fools so willing to rush in where angel investors fear to trade? Let's find out as we examine...

The bull case for SiRF Technology
In May, CAPS newcomer velleity gives us the backstory to how SiRF got where it is today: 

SIRF is a GPS chip manufacturer that recently saw its stock price fall more than 50% due to lower-than-expected quarterly results. This was followed by a spate of law suits and the replacemnent of the CEO. They've got the history to back up the fact that they can produce, investors overreacted to the quarterly news and the price should adjust in the next several months.

ppkf sees SiRF as a buyout target:

SIRF(w Centrality), Intel (NASDAQ:INTC) (apple's core), Apple (NASDAQ:AAPL) (shopping for GPS), Garmin (NASDAQ:GRMN) (alone and need to compete)... I am betting on some relationships to take shape soon. ... The stock is damaged but not the company. Its about time for a "white knight" to march in for a bargain. Yes, long term investors used to hate the management... I do not think that SIRF will play the "hard to get" game what Yahoo (NASDAQ:YHOO) did to [Microsoft (NASDAQ:MSFT)]. They need each other to compete-SIRF needs mobile/PC and others need GPS/multimedia engine to better [integrate].

Yet the buyout scenario has proved a dangerous mirage to many an investor. CAPS All-Star PopsDaniecki backed the stock in February, writing:

If the legal battles are all lost, this company can pay the tab. If it's not, the price is going to rebound like a yo-yo. If somebody comes to the rescue and buys this depressed asset out, stock holders will win anyway from this current price. I don't see many reasons to NOT put a few bucks on this one.

I agree. Yes, SiRF's stock has been mangled. True, it doesn't even have a P/E. But although the stock looks unprofitable under GAAP accounting standards, SiRF currently trades for less than eight times its trailing free cash flow.

When you consider all the places GPS is popping up these days -- in iPhones and Cadillacs, GPS-dedicated personal navigation devices and cargo containers -- the prospects for continued growth at SiRF make analyst estimates of 15% growth look modest in the extreme. But even if they're dead on the money with their growth guesses, paying eight times FCF for a 15% grower is dirt cheap.

Don't fear the tide of negativity. Ride SiRF to profits.

(Or not)
Prefer to swim with the tide rather than against it? All voices are welcome at Motley Fool CAPS -- if you think the Street's right on this one, come on over to CAPS and tell us what you think.