"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 stars max.)

McKesson (NYSE:MCK)



Gammon Gold (NYSE:GRS)



Energy Conversion Devices (NASDAQ:ENER)



Emergent BioSolutions (NYSE:EBS)






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.

Up on Wall Street, the investment bankers are unloading these stocks. Truth be told, Fools aren't too hot on their prospects, either. Despite every reason to the contrary, the U.S. dollar seems to be holding up just fine, taking the shine off gold prospectors such as Gammon and DRDGOLD. And while biotech and alternative energy remain popular in general, Fools don't seem enthused about Energy Conversion or Emergent in particular.

However, we do like McKesson. This drug wholesaler receives five stars from investors on CAPS, and it's a recent addition to the official Motley Fool Stock Advisor recommendation list. You can learn David Gardner's reasons for recommending McKesson by taking a free trial to the service. Meanwhile, let's listen in on what other Foolish investors are saying about the stock.

The bull case for McKesson
CAPS All-Star stan8331 keeps the investment thesis simple: "We're getting older. I like the idea of betting on a solid company like McKesson a lot more than hoping a pharma giant will find some expensive new homerun drugs." Smart choice. Judging from the buyouts recently announced at Merck (NYSE:MRK) and Pfizer (NYSE:PFE), even Big Pharma is losing confidence in its ability to discover "home run drugs" on its own.

Meanwhile, as far back as 2006, Fools were singing McKesson's praises. Take fellow All-Star investor dilettantedude, who wrote: "Three things are driving McKesson: rapid development of new drugs; demographics; and Medicare Part D. ... Their transition to a fee-for-service business model, which hurt the distribitors last year, appears to have been very successful in boosting margins and ROIC..."

Flashing forward to the present, adavisclan adds: "Should national health care become a reality more people will have access to distributors such as Mckesson. They continue to generate and grow their free cash flow (which I believe is the life blood of any company) allowing for internal capital funding in these tight credit times."

Ah, "free cash flow." Three words to warm the cockles of my value-investing heart. But just how much of the green stuff is McKesson generating? Quite a lot.

The company produced some $1.4 billion in free cash flow last year -- or about 69% more than it was allowed to report as "net earnings" under GAAP accounting rules. Thus, while McKesson looks fairly priced on a P/E basis, the stock's an absolute steal when you realize how much cash it's churning out.

Even with a modest amount of debt on its books, McKesson sells for an enterprise value-to-free cash flow ratio of just 6.9. With analysts foreseeing 11% annual profit growth over the next five years, it's hard to imagine how this eminently undervalued stock can fail to beat the market.

Time to chime in
That said, the aim of this column isn't just to tell you what I think about McKesson -- or even what my fellow CAPS players are saying. We'd really like to know your thoughts on the matter. Do you believe McKesson offers a good opportunity at a good enough price? And are you fearless enough to buy it when the professionals are selling? Click on over to Motley Fool CAPS and tell us why.

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

McKesson is a Motley Fool Stock Advisor recommendation. Pfizer is an Inside Value selection.

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. 313 out of more than 130,000 members. The Fool has a disclosure policy.