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. This week, investors do see a bargain -- three guesses which one it is.

You win!
That's right, dear reader. Our No. 1 hated-by-Wall-Street, loved-by-Main-Street stock this week is none other than "process value management" consultant Thomas Group. Tiny in size, at a market cap just more than $100 million, and unfamiliar to most investors, being tucked away down in Irving, Texas, it's certainly a company with room to grow. But does it have the ability?

Well, 97% of CAPS investors polled think so, including 98% of our All-Stars. Let's find out why:

• CAPS prodigy pencils2 finds a "lot of pluses with TGIS: no debt, $4M+ in cash, strong insider ownership, increasing revenue and income, gives a dividend, and a low P/E compared to the industry."
  
  
• So why is it selling so cheaply? All-Star player Gtrinvestor blames "the ubiquitous stock option backdating charges everyone is taking (which in the long-term hardly affect the company's stock price)."
  
  
• Looking past the stock options to focus on the business, wolfienola observes that Thomas Group has "an excellent reputation amongst their clients and get a high percentage of repeat business." About the only thing wolfienola doesn't like about the company "is that they call their consultants 'Resultants', which sounds so hokey!!!!"

No argument there, wolfienola. But there's nothing hokey about a sub-10 P/E ratio, and free cash flow that fully equals net profits reported under GAAP. For my money, any company that produces numbers like this, and sells for a price like that, can call its employees "successinators" if it wants to. Moreover, numbers like these could make this business a potential buyout target for a growth-hungry, larger firm like Motley Fool Stock Advisor recommendation Resources Global (NASDAQ:RECN).

Time to chime in
Of course, the purpose of this column isn't to tell you what I think about Thomas Group. Rather, we'd like to invite you to visit Motley Fool CAPS and tell us your own thoughts on this and the other companies featured this week. Take a look, decide what you think of 'em, and let us know!

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

(By the way, if you are looking for stock advice, then at least take it from Fools smarter than I. Free trial subscriptions to Motley Fool Stock Advisor are yours for the asking.)

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. 1,291 out of nearly 29,000 rated players. The Fool has a disclosure policy.