"The idea of buying a former superstar stock at a discount price certainly has its attractions, but you've got to make sure you catch the haft -- not the blade."

That's the thesis of my weekly Fool.com column "Get Ready for the Bounce," where I run the 52-week-lows list compiled by Nasdaq.com through the "wisdom of crowds" meter we call Motley Fool CAPS. Out the other end comes a list of stocks that have fallen so far, Foolish investors figure they're just bound to bounce back soon.

But is there a way to cash in on fallen angels who've plummeted even further? Perhaps. If a stock that's fallen for one year straight has room to rise, perhaps a stock that's fallen even farther, for even longer, has room to soar back even higher. In that case, an apparently left-for-dead stock could offer us a drop-dead gorgeous entry price. We're going to test that thesis today, starting with five stocks that just hit their five-year lows:


Recent Price

CAPS Rating (out of 5):

Kimberly-Clark  (NYSE:KMB)



M&T Bank  (NYSE:MTB)



Wilmington Trust 



Flushing Financial  (NASDAQ:FFIC)



Protection One  (NASDAQ:PONE)



Companies are selected from the "New 5-Year Lows" list published on MSN Money on Thursday. CAPS ratings from Motley Fool CAPS.

Left for dead? Or drop-dead gorgeous?
Each of the stocks listed above has shed between 25% and 65% of its value over the past year alone, and each currently sits at or near its five-year low. Wall Street has left 'em for dead, and Main Street investors are inclined to agree -- for the most part.

But we're not yet ready to give up hope on Kimberly-Clark. Really, regardless of how bad the economy gets, will people really give up blowing their noses on Kleenex? Will we really let our toddlers run around the shag rug Huggies-less? I think not.

The bull case for Kimberly-Clark
Why not? As oxsigtech reminded us in August: "Toilet paper is not an option." Sound advice.

ricardorubiosr expanded on the logic a bit back in June:

During a recession or inflationary period the products from Kimberly-Clark always will be needed, in spite of higher prices. Also, [Kimberly-Clark] is a global company with almost half of it sales and profits coming from the Developed and Emerging markets of Latin America, Eastern Eurpe, Asia and Oceania which are growing at a double digit rate, not only in dollars but in volume, and market shares in most of the countries are #1 or #2 against other global and local competitors.

Wrapping up with a big-picture verdict on investment potential, jmackman opines:

The last 18 months have given us both grief and gifts. Dump the grief and buy the gifts. Historically high dividends in solid quality companies are the gifts. [Kimberly-Clark] is just one good example.

The difference between "safe" and "good"
In the midst of a recession, there's good reason why the stocks holding up best against the downdraft have names like Johnson & Johnson (NYSE:JNJ), Procter & Gamble (NYSE:PG), Energizer Holdings (NYSE:ENR), and ... Kimberly-Clark. When times are tough, investors seek safe harbor in the consumer-staples sector, because these companies sell the stuff that people must buy in good times and bad.

The logic's simply unassailable -- so why don't I buy it? Simply put, while I agree that the recession won't kill Kimberly-Clark, I don't expect any great growth out of it once the economy recovers. Right now, analysts have it pegged for less than 8% annual growth over the next five years. That's not just slower than the industry average -- it's also the slowest expected growth rate posited for any of the four firms above.

To me, such upper-single-digit growth just doesn't justify the company's 12 P/E ratio (or its slightly worse price-to-free cash flow ratio). Not when you can buy two more points of annual growth for just a 13 P/E at J&J, or a 16 P/E at P&G -- or an honest-to-goodness sub-1.0 PEG ratio at Energizer.

Time to chime in
That said, I suppose there's an argument that recessionary times should spur investors to put "growth" on a back burner and stick to dividend investing. And Kimberly-Clark certainly boasts the richest dividend yield of the four consumer-staple sellers named above; at 4.6%, that payout has won the company a place in the Motley Fool Income Investor portfolio.

Should that fat dividend command our focus today? Tell us what you think.

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Kimberly-Clark and Johnson & Johnson are Motley Fool Income Investor picks. The Fool owns shares of Procter & Gamble.

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. 1,769 out of more than 125,000 members. The Fool disclosure policy is grateful for both tissues and diapers.