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 further, and for 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 five-year lows:

Company	Recent Price	CAPS Rating (5 stars max.)
Skilled Healthcare  (NYSE: SKH  )	$8.62	*****
American Capital (Nasdaq: ACAS  )	$2.88	****
Electronic Arts  (Nasdaq: ERTS  )	$15.12	***
IPC The Hospitalist Company (Nasdaq: IPCM  )	$14.92	***
Pioneer Natural Resources  (NYSE: PXD  )	$14.80	***

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

Left for dead? Or drop-dead gorgeous?
Each of the stocks listed above has shed between 25% and 95% of its value over the past year, and currently sits at or near its five-year low. Wall Street has left 'em for dead, but Main Street investors aren't so sure. All of these stocks enjoy at least average support among individual investors on CAPS, and one of them ranks among the best.

Skilled Healthcare ...
The name says it all here, because Skilled Healthcare specializes in providing long-term nursing care and facilities to dialysis, chemo, and other at-need patients.

Perhaps that's why the sole CAPS member who's penned a pitch on this stock (All-Star beeple) limits the chorus of support to a single word: "boomers." I think we can all agree that baby boomers are going to be a growth market for health care for quite a while.

Analysts expect the company to post nearly 15% long-term earnings growth in its business, slightly ahead of rival Kindred Healthcare (NYSE: KND  ) ; slightly behind Ensign Group (Nasdaq: ENSG  ) . Yet if you look closely, you'll see that Skilled Healthcare boasts beefier operating margins than either of its rivals, even as it sells for the lowest P/E of the three. What's more, Skilled Healthcare has earned profits consistently over the past five years, even as it generated positive free cash flow in each of them -- two claims that Kindred most emphatically cannot make.

Valuation
Granted, right now Skilled Healthcare is going through a bit of a rough patch, free cash flow-wise. The $14 million generated over the past year isn't enough to make the stock a "buy" in my book. But between its sub-10 P/E and that 15% growth rate, I can certainly see why a lot of CAPS members see a bright future for Skilled Healthcare.

Time to chime in
What I'd really like, though, is to have a few more people who really know this company tell us what they think about it.

So here's my request: Like it or hate it, or if you're looking for a bargain, if you know Skilled Healthcare, take a minute or two to drop by Motley Fool CAPS and tell us what you think about its stock. With commentary so scarce, I can pretty much guarantee that you'll quickly find yourself listed as either the top "bull" or "bear" commenting on the company.

Motley Fool CAPS: It's fun, it's free, and it just might make you famous.

On Jan. 12, 2009, Fool co-founder David Gardner, Jeff Fischer, and their Motley Fool Pro team will accept new subscribers to their real-money portfolio service. Motley Fool Pro is investing $1 million of the Fool's own money in long and short positions in a range of securities, including common stocks, put and call options, and exchange-traded funds (ETFs). They also incorporate proprietary CAPS "community intelligence" data into their research. To learn more about Motley Fool Pro and to receive a private invitation to join, simply enter your email address in the box below.