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 farthest. Then we'll head over to Motley Fool CAPS and ask which of these stocks Foolish investors think are ready to rebound to new highs -- if any.

With that said, let's meet today's list of contenders:

Knives and knaves
Most stocks on MSN's "shot" list don't even have CAPS ratings; they're too small and too illiquid to merit inclusion in our service. But every week a handful of new contestants enter our field of view. Some we're familiar with, and have already assigned ratings to. This week, though, we've got more strangers than acquaintances. (And I choose that word carefully. None of the three rated stocks above engender sufficiently warm feelings in CAPS-land to be called "friends.")

Ready to bounce?
You see, knowing who's fallen hardest is only half the battle. You still need to decide whether to reach out and grab the knife. That's where CAPS comes in. We've assembled more than 19,000 investors (and counting), and invited them to tell us which stocks they expect to outperform or underperform the S&P 500. In this week's group, CAPS players see little hope that any of these companies will bounce higher than your average deceased feline; not a one of them gets so much as a "market performing" 3-star rating.

One company, though, looks poised to accomplish at least that. Oncology specialist Aeterna Zentaris has already collected the 10 ratings necessary to earn its stars -- it's just that a handful of Aeterna's ratings are too new to have gone into effect yet. Let's try to get a feel for how many stars Aeterna might merit once they do, by listening in on what the raters are saying:

• All-star investor epc53 warns "the distribution of Atrium shares" could precipitate a decline in Aeterna's stock price.
• spoonbillmgmt looks at the same facts, but comes to the opposite conclusion, arguing that the "distribution of stock in a specialty chemicals company spun off by Aeterna Zentaris" is a reason to buy Aeterna before the spinoff.
• Meanwhile, focusing in on what will be left of Aeterna after the split, PlovieR likes the fact that Aeterna has "2 Drugs on Market ... 2 in phase 3 [trials and] 5 in Phase 2," plus "70 million in Cash" to finance the drugs' advancement.

Do you buy the bear argument? The bull? Either way, let us know on CAPS. And if you're able, make sure to chime in on Basin Water and On Track Innovations as well -- both stocks are just one rating away from earning their own stars.

Motley Fool CAPS: We've already done it; you can help.

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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 67 out of nearly 19,000 raters. The Fool has a disclosure policy.