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 desperate  institutions become 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
When it will stop is anybody's guess. But until it does, savvy investors have a chance to "get greedy" and snap up some bargains from these fearful sellers (if bargains they truly be).

CAPS players seem to think "they be not" this week, as not a single one of the seven stocks on today's list enjoys an above-average rating. Left without an obvious choice of which stock to profile, I'm going to exercise my editorial prerogative today and take a look at the one company that just plain seems most interesting.

That company would be Cray. Yes, Cray -- the people who made the supercomputers we all read about in the good old days of the Cold War, and the people who are making supercomputers still. Who knew they were even public?

The bull case for Cray
First off, let me be clear: There's no bull case being made on CAPS. With just two stars to its name, Cray is clearly disliked in CAPS-land. That said, it does have some fans. Notably:

• silverwave, who echoes my own sentiment, writing: "This is Cray. CRAY, [for goodness sakes]. When I was little, I learned that CRAY made the bestest supercompizzlers in the world. Has that changed..? New DARPA contract for increased funding..! Someone tell me why this isn't a great takeover target by IBM or someone else?"
  
  
• y2kurtus is only a little less enthusiastic, asking: "How can you not love a supercomputer company... these [guys] are so small that every incremental sale is huge and they could get bought without so much as a hiccup!"
  
  
• Finally, cibient observes, "Cray has a good backlog of orders and seems to be making good inroads with their new AMD Opteron-based systems. I believe their darkest days are behind them (2002-2004 period)."

Granted, from a surface-level viewpoint, Cray is currently unprofitable, losing nearly $13 million last year. However, on a cash profits basis, we can see that the firm generated $10 million in free cash flow over the last 12 months. Analysts project 20% profits growth per year over the next five years. And it boasts a rock-solid balance sheet, with $35 million more cash than debt. Take those numbers, crunch them properly, and the stock still looks a bit overvalued to me. But it's worth keeping an eye on -- this company just plain isn't in as bad a shape as first meets the eye.

Bears wanted. Bulls, too.
Hey, but forget about what I think. What we'd really like to hear is your opinion on the company. Cray may make supercomputers, but is it a super stock? Come on over to Motley Fool CAPS and tell us what you think.

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

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 No. 285 out of more than 28,000 raters. The Fool has a disclosure policy.