Fearful Stocks for Greedy Investors

"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:

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 and CAPS ratings from Motley Fool CAPS.

Black gold doesn't shine
Professional traders seem particularly pessimistic about petroleum -- but not just petro. While drillers and refiners dominate the Wall Street's least-loved list, we're also seeing a sell-off in coal and gas.

Fools, in contrast, remain decidedly optimistic about the energy sector. CAPS members give above-average ratings to almost every stock shown above (sorry GMX, no love for you), but there's one company they love more than most:

PetroQuest Energy
MysticSemjaza highlighted PetroQuest a bit over a year ago as a: "Sweet little company in the right industry ... heavy management ownership with good cash flow and a very healthy profit margin." (Note, however, that while insider ownership is indeed high, at 13.4%, the firm's free cash flow is running negative, as is the company's profit margin.)

Even so, traderbarwis agreed that PetroQuest is in a sweet spot, predicting last January that: "Natgas is the clean fuel of the future in the USA. I belive in Boone Pickens plan."

CAPS All-Star pokermoney, in contrast, believes in something else -- a buyout. Last summer, this Fool called PetroQuest a: "takeover target."

So is a buyout likely here? Let's consider the facts. "PetroQuest" sounds like a company whose business is digging up black gold -- but there's a difference between what you "quest" for and what you find. In PetroQuest's case, the company's so far managed to drill only 16 producing oil wells ... but 893 producing gas wells. That looks pretty good.

But, recall that the firm carries a sizeable debt load (about $250 million in net debt, as of their last balance sheet). That's a factor that any potential acquirer will need to consider -- and so should you. Finally, bear in mind that the firm just offered 10 million new shares at a price about 9% below the stock's closing price of last week.

Time to chime in
Personally, I'd hesitate to pay a 9% premium over what other folks just paid to own PetroQuest. Seems to me there are better ways to play a rebound in natural gas prices.

Moreover, why limit yourself to just one flavor of energy in the first place? Sure, natural gas prices will rebound eventually -- but oil prices are rising right now. Investing in an integrated energy company like ExxonMobil (NYSE:XOM) or Chevron (NYSE:CVX), which have their fingers in both oil and gas, may be the better bet.

But that's just my opinion, and truly, the aim of this column is to ask your thoughts on the company. So, if you've got an opinion, we've got a place to tell it.