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

Of all the Oracle of Omaha's orations, this one holds a special place in Foolish investors' hearts. When looking to bag a bargain, a panicked sell-off by jittery investors offers you a great chance to snap up stocks on the cheap.

In the short term, professional traders' pessimism can become a self-fulfilling prophecy. Desperate institutions lower their asking prices to get rid of a stock, prompting buyers' bid prices to fall in tandem, creating the very price decline that both sides feared in the first place -- until the selling stops.

Until it does, savvy investors can "get greedy," snapping up bargains from these fearful sellers. (Assuming they really are bargains.) In today's column, we'll see which stocks Wall Street's motivated sellers are most frantic to unload. Once we've compiled this shopping list of potential picks, we'll check them against the collective intelligence of Motley Fool CAPS.

Today's contenders include:


Recent Price

CAPS Rating

(5 max):

Sutor Technology  (NASDAQ:SUTR)



TBS International  (NASDAQ:TBSI)



Patriot Coal (NYSE:PCX)






Lehman Brothers



Companies are selected from the "Institutional Ownership Down Last Month" list published on MSN Money on the Saturday following close of trading last week. Recent price provided by Yahoo! Finance. CAPS ratings from Motley Fool CAPS.

So here we have five stocks that professional investors are selling with abandon. Yet in at least two instances, CAPS members shout: "Not so fast! TBS is a buy. So's Sutor. And Patriot Coal -- the price there's not half bad either." (On the other side of the spectrum, everybody who's anybody, and several people who aren't, agrees that Spectranetics probably belongs to the genus canis, while Lehman is an actual dog with fleas.)

Leaving those last two aside for a moment, though, and concentrating on the two individual investor favorites, which of these shall we profile today? I've taken a quick look at the financials and decided that between TBS International and Sutor, Sutor's the better buy by far. Before I explain why I think so, though, let's take a quick poll of opinions on CAPS, to get a feel for ...

The bull case for Sutor Technology

  • bandofbrothers introduced us to this Chinese steelmaker in April: "From big ticket items like infrastructure to little ticket items like home appliances [Sutor] is involved (in steel) across the board. They are committed to quality products, take pride in their 'brand' and can actually deliver their finished goods from factory to the purchasing customer. They are making money and growing earnings. Management is young, confident and seems more than qualified in their respective fields."
  • CMUinvestor agrees, arguing at about the same time that: "Specialized steel will be necessary to China's modernization and industrialization. Sutor will play a large role in supplying the growing automotive demand in China for the next decade." In so doing, though, Sutor faces strong competition from Korea's POSCO (NYSE:PKX) and Europe's ArcelorMittal (NYSE:MT).
  • On this point, wiseman213 argues, again in April, that: "[Sutor] is already showing signs of wanting to separate itself from the crowd. They are the only suppliers of anti-static [steel] in China used in specialty application. This month [Sutor] has finished a 50,000 sq ft state-of-the-art R&D center that will eventually [host] 100 scientists and technicians [and] announced a major expansion that will generate up to $350M in new revenues or twice the current market cap. The company expects to exceed $1/share net income in 2009."

Well, based on the buy-sell trends, it seems Wall Street has discovered Sutor since our three CAPS members wrote about it in April. Unfortunately, it seems that no sooner did the Street find it than it promptly decided to sell Sutor. Is that a mistake?

I mentioned above that I liked this stock better than I like bulk shipper TBS International. Let me now explain why: On the surface, the two stocks look fairly equal in value. Both rely to a large extent (albeit Sutor to a larger extent) on China for their growth stories. TBS ships raw materials on which Chinese growth depends. Sutor feeds that growth by refining the raw materials into high-quality steel.

Both appear to be cheap on a basic price/growth equation, scoring PEG ratios of about 0.4. Meanwhile, each carries a risk in that unlike Chinese hypergrowth stories like Baidu.com (NASDAQ:BIDU) or SINA (NASDAQ:SINA), both Sutor and TBS International belong to what we used to call the "Old Economy" -- companies needing massive capital spending to keep their growth going. Thus, neither company has positive free cash flow at this time. In fact, it has been five years since TBS ended a year in the black from a FCF perspective. However, Sutor was generating free cash as recently as 2006, and appears to be moving back in that direction already.

Therefore, were I a betting man and asked to choose between these two stocks -- both hated by Wall Street, but both loved on Main Street -- I would put my money on Sutor before TBS.

Time to chime in
But hey, that's just one Fool's opinion. Maybe you don't find the lack of free cash flow particularly worrisome? If you've got another point of view on either Sutor or TBS, here's your chance to make your case. Just click on over to CAPS and tell us which one you prefer -- and why.

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

POSCO is a Motley Fool Income Investor selection, Baidu.com is a Rule Breakers pick, and SINA is a Stock Advisor recommendation.

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 ranked No. 507 out of more than 115,000 players. The Fool has a disclosure policy.