Drop-Dead Gorgeous Stocks

"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 Motley Fool CAPS' "wisdom of crowds" meter. The result: 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 with even deeper plummets? Perhaps. If a stock that's fallen for one year straight has headroom, then maybe a stock that's fallen even farther, and 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'll test that thesis today with five stocks that just hit their five-year lows:

Companies are selected from the "New 5-Year Lows" list published on MSN Money on Thursday, January 14. CAPS ratings from Motley Fool CAPS.

Left for dead? Or drop-dead gorgeous?
Each of the stocks listed above has shed between 50% and 95% 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.

The companies making the list this week mostly operate in the beleaguered financial services industry, so it's understandable that investors already once- or twice- or even thrice-bitten are leery of jumping back into that snake pit. But one firm here is not like the others: Drew Industries, a bona fide manufacturer (of non-financial products) and a Motley Fool Hidden Gems recommendation to boot. It's been beaten up as badly as any bank, though, so why are Fools sticking with Drew?

See if you can connect the dots as we examine...

The bull case for Drew Industries
NetscribeInduGds introduced us to Drew more than two years ago:

The company ... supplies a broad array of components for recreational vehicles (RVs) and manufactured homes (MHs). By expanding its geographic market and adding manufacturing facilities, the company has grown to encompass 47 manufacturing facilities in 17 states .... In the coming years RV industry's sales are expected to be driven by positive demographics, as demand for RVs is strongest from the over 50 age group, which is the fastest growing segment of the population. ... Drew seeks to expand by increasing market share, introducing new products and making strategic acquisitions. ... While increasing sales, management has maintained its focus on profitability...

Patrick6k agrees, pointing out in August that:

Baby boomers are nearing retirement and travel is always at the top of 90 percent of retirees' lists. While the manufactured housing products segment may slow somewhat, the recreational vehicle segment of Drew Industries is primed for profits. ... They have solid management, good inside ownership, and a line of products in growing demand. This company has solid ROE and ROA, and is trading at a nice discount.

But what about the fear that consumers burned by high gas prices last year will steer clear of gasoline-chugging RVs in the future? JavaChipFool thinks the worry is overblown, commenting last summer:

RV's are not that expensive to drive to winter quarters and back if you tow a Mini or a Fit. And, oil will be at 70$ a barrel in a year, and will probably hover between 70-100 for another 5 years before it climbs until we don't need it anymore because it's too expensive. Higher prices will cut demand, more efficient vehicles are on their way.

Good to know somebody's got a handle on where oil is going. After Goldman Sachs (NYSE:GS) famously flubbed its $200-a-barrel call, I was worried that the future might be unknowable! (Just kidding, JavaChipFool. Actually, it's looking like you hit closer to the mark than Goldman did, and came close to nailing the short-term forecast that the Department of Energy posted two months after your pitch.)

As for our other pitchers, I find myself agreeing with their demographic arguments as well. With a P/E of just 7, and analysts predicting 14% long-term earnings growth at Drew, the stock compares favorably to other popular Baby Boomer-themed investments -- Pfizer's (NYSE:PFE) 11 P/E and estimated negative five-year growth, for example. If you're going to invest in a demographic trend, I say, invest with a sizeable margin of safety -- and Drew's got that in spades.

Time to chime in
Of course, in the words of the great Dennis Miller: "That's just my opinion. I could be wrong." What do you think about Drew? Click on over to CAPS, and tell us all about it.