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."

So goes the thesis of my weekly Fool.com column "Get Ready for the Bounce." Therein, I run the 52-week-lows list compiled by Nasdaq.com through the "wisdom of crowds" meter that we call Motley Fool CAPS. And 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 headroom, then maybe a stock that's fallen even farther, and longer, has room to soar back even higher -- in which 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:

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

Left for dead? Or drop-dead gorgeous?
Each of the stocks listed above has shed between 30% and 80% of its value over the past year alone, and currently sits at or near its five-year low. Wall Street has left 'em for dead, and Main Street investors aren't exactly rushing out to clean up the roadkill, either -- except in one instance.

Standing alone on our list of five-year losers, one stock sports CAPS's highest possible rating, a full five stars. And that makes Western Refining our focus stock for this week.

The bull case for Western Refining
For those not already familiar with the company, we'll let CAPS All-Star DarthMaul09 make the introductions:

Western Refining, Inc. ... is an independent crude oil refiner and marketer of refined products, and also operates service stations and convenience stores. The Company operates in three segments: refining, retail and wholesale. The Company owns and operates four refineries with a total crude oil throughput capacity of approximately 238,000 barrels per day. In addition to its 128,000 barrels per day refinery in El Paso, Texas, Western Refining also owns and operates a 70,000 barrels per day refinery on the East Coast of the United States near Yorktown, Virginia and two refineries in the Four Corners region of Northern New Mexico with a combined throughput capacity of 40,000 barrels per day. Its primary operating areas encompass West Texas, Arizona, New Mexico, Utah, Colorado and the Mid-Atlantic region.

CAPS member serrall looks at these numbers, compares 'em to the stock price, and declares:

Their refining capacity is dirt cheap-just a nice takeover candidate. Its CEO and main shareholder might be looking for somebody with cash to get along with the debt-and pay a nice premium to shareholders. USD 8/share looks a decent premium at current pricing.

But even if a buyout offer does not emerge, another of our CAPS All-Stars, drivermike64 this time, thinks Western Refining should do just fine. Why? Because: "economic recovery will drive up fuel demand, along with the price of gas."

And yet, several other CAPS members have raised worries over Western Refining's heavy debt load -- $1.1 billion in debt, versus barely $65 million in cash. Are there reasons to be optimistic about the stock, its debt load notwithstanding?

Actually, there are. For one thing, Western Refining generates operating profits more than sufficient to pay interest on its debt, even in this depressed market environment. It also doesn't hurt that the company boasts stronger operating margins than many of its peer refiners: Western's 2.6% operating margin trumps Tesoro's (NYSE:TSO) 2.2%, eclipses Sunoco (NYSE:SUN) and Valero (NYSE:VLO) at 1.8% and 1.7% respectively, and is more than twice as good as Frontier Oil's (NYSE:FTO) 1.1% margin.

The company's profits even suffice to cover payments on its generous 5.2% dividend yield, which is a better yield than you can get from any of the rivals named.

Last but not least, Western's expected to grow at about the industry average of 4% per year over the next five years, suggesting that as big as the divvy looks now, it could conceivably get bigger -- perhaps much bigger, if the economic recovery arrives faster and/or stronger than expected.

Foolish takeaway
Is Western Refining a "sure thing?" Not at all. Not with so long as that $1 billion debt cloud looms over it. But assuming things don't get too much worse with the economy, Western looks positioned to ride out the storm and emerge safe on the other side (if only just barely.)

But hey, that's just my opinion. What's yours?