Contrarian Shopping List

"We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful." -- Warren Buffett

Out of the quadrillions of quotations quarried from that most loquacious of quotationists, this one holds a special place in the hearts of Foolish investors. Are you looking to "buy low" so as to later "sell high"? If so, your best chance of getting that initial, low entry price comes when panicked sellers are unloading their shares at whatever price is on offer.

In today's column, we search the ranks of Wall Street's motivated sellers and note which stocks they're most frantic to unload. Therein may lie the makings of a contrarian investor's shopping list. But don't just take my word for it. Before you decide to go in through Wall Street's out door, check your thinking against the collective intelligence of Motley Fool CAPS investors.

Today's contenders include:

The problem with pessimism
The problem with going against the grain on Wall Street is that when professional traders get pessimistic, their grim outlook can become a self-fulfilling prophecy -- at least in the short term. The more that institutions become desperate to abandon a stock, the lower the price they'll accept to get rid of it. And as their "ask" prices drop, the "bid" prices of buyers will fall in tandem, creating the very price decline that they feared in the first place.

Until the selling stops.

In through the out door
From today's list, I'm certainly tempted to pick on AMD, which suffered the (self-inflicted) injury of an earnings warning earlier this month, aggravated by the insult of a whopping eight analyst downgrades in the month of January alone (and the month's not over yet). But hasn't AMD suffered enough?

Instead, let's turn today to what I suspect is a lesser-known stock -- but one that CAPS players believe has much better prospects than does AMD. Today, let's meet five-star-rated Sonic Foundry, a tiny Wisconsin tech firm that specializes in Webcasting and Web presentation products. To date, 110 of our lay analysts have reviewed the firm, and only three give it the thumbs down -- none of whom, I might add, is an all-star. On the contrary, all 25 all-star players who've looked at Sonic Foundry rate it an outperformer. Here's why they love it:

• All-star player creff1 likes Sonic Foundry's MediaSite product and is impressed with the firm's "strong and growing list of ongoing customers."

• plluke, although not an all-star CAPS-er, does "work on conferencing technologies," and also thinks that "MediaSite seems like it could do quite well," explaining: "The market is definitely there (companies like CSCO are also driving telepresence products and services) and they are aggressively poised."

• Batting clean-up, let's see what pennysplants (ranked in the top 1/100th of CAPS players) has to say about Sonic Foundry: "Company is closing in on financial performance. I expect 3-6 months before SOFO proves its worth. Still very much a "story stock," though. But, if others think the "pipeline" is important (ie AKAM), shouldn't the "content" also deserve attention/investment? Both feed off each other in the marketplace. SOFO deserves some respect ... and my CAPS vote ... at least in the short term."

Now it's your turn, dear reader. Do you agree with our three Fools above, who think Sonic Foundry is poised for greatness? Or do you turn a deaf ear to their arguments? Log on to CAPS now, and tell us what you think, whether it's about Sonic Foundry, AMD, or any of the other companies on today's list.

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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 30 out of nearly 21,000 raters.