Get Ready for the Bounce

"Don't catch a falling knife," as the old saw commands. (Pardon my mixing a cutlery metaphor.) 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. That's where Motley Fool CAPS comes in.

Today, we once again stand beneath Mr. Market's silverware drawer, measuring which knives have fallen the farthest. Then we'll call on CAPS to ask which of these stocks -- if any -- Foolish investors believe are ready for a rebound. Let's meet today's list of contenders, drawn from the latest "52-Week Lows" list at WSJ.com:

Company	52-Week High	Recent Price	CAPS Rating (5 max):
Charles Schwab  (Nasdaq: SCHW  )	$26.20	$14.84	****
American Express  (NYSE: AXP  )	$52.63	$17.01	***
Wells Fargo  (NYSE: WFC  )	$44.75	$18.68	***
Marshall & Ilsley  (NYSE: MI  )	$29.97	$7.62	**
HSBC Bank  (NYSE: HBC  )	$88.15	$39.95	*

Companies are selected from the "New Highs & Lows" list published on WSJ.com on the Saturday following close of trading last week. 52-week high and recent price provided by Yahoo! Finance. CAPS ratings from Motley Fool CAPS.

Knives and knaves
If there's one good thing about a broad-based market sell-off, it's that you find a lot of terrific companies getting the ol' baby 'n' bathwater treatment. Tossed out on their rosy little bums as if they were bums of another sort. You just know that some of these babies are gonna bounce right back once the suds subside.

Right now, the financial firms are wailing loudest -- and investors are whaling on their stocks the hardest. CAPS members think much of the punishment is well-deserved, but in at least one instance, they're willing to relent. Somebody, it seems, doesn't want to chuck Charles Schwab.

The bull case for Charles Schwab 
My Foolish colleague, Rick Munarriz, made a compelling case for inviting Chuck to your portfolio party last week. And it seems CAPS members largely agree. Commenting on the same earnings results that inspired Rick's column, reachnvj writes: 

Decent results ... Company has a healthy balance-sheet-[approximately] $5 billion in cash and about $11 billion in receivables with very limited debt. Some exposure in mortgage-backed securities, however, not as significant as it is for the financial institutions. [Charles Schwab] should be able to weather this market and come out strong when people start investing their money.

Varchild2008 points out, too, that right now Charles Schwab stock: "Trades at same price as it's 2002 price. That's a 6 year low folks for a name brand company with a quality service."

And as for tomorrow, gweech has this to say:

The US savings rate is expected to hit 5% to 7% in 2009. People should be spending less on HD TVs (as we have already seen) and putting their money to work. Schwab IS a powerful brand with a trusted name and a discount broker.

Lest we lose sight of the forest for the trees, I'd add that Schwab is both a powerful brand, a trusted name, etc., etc., and an awfully cheap stock. The company's carrying only a 14 P/E, despite analysts telling us it will grow profits at better than 18% per year over the next half decade.

Sure, things are looking bleak for the brokerage houses right now, but consider: In a rough economy, do you think penny-pinching investors are more likely to do their trading via a full-service broker, or a discount broker like Charles Schwab or TD AMERITRADE (Nasdaq: AMTD  ) ? With investors' trend toward increasing thriftiness working in its favor, I expect even E*Trade (Nasdaq: ETFC  ) will eventually figure out how to make a profit. But why invest in that mere hope, when you can own Schwab right now, and get it at a discount?

Time to chime in
Disagree? Hey, feel free. Just do us a favor -- don't keep your thoughts to yourself. If you think Schwab's as much of a dog as Wall Street appears to believe, come on over to Motley Fool CAPS and clue us in on the whys and wherefores.

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