Get Ready for the Bounce

"Don't catch a falling knife," as the old saw commands. (Pardon my mixing a cutlery metaphor.) 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 where Motley Fool CAPS comes in.

Today, we once again stand beneath Mr. Market's silverware drawer, measuring which knives have fallen the farthest. Then we'll call on CAPS to ask which of these stocks -- if any -- Foolish investors believe are ready for a rebound. Let's meet today's list of contenders, drawn from the latest "52-Week Lows" list at WSJ.com:

Companies are selected from the "New Highs & Lows" lists published on WSJ.com on Thursday and Friday last week. 52-week high, recent price, and CAPS ratings from Motley Fool CAPS.

Damage report
Leading off with my biggest embarrassment, we find Hellenic Telecommunications continuing to flounder. My predictions notwithstanding, it would appear that the Greek financial crisis isn't going quietly into the night. Fears of an imminent debt apocalypse still bother many investors. (Although, like me, most CAPS members remain bullish on the company's prospects. I mean, even if Greece does default, doesn't that just mean more business for the phone company, handling all those bill collector calls?)

Moving on, Acura shares fell when a Food and Drug Administration panel voted 19 to 1 to reject its experimental, supposedly abuse-resistant "Acurox" painkiller. Development partner King Pharmaceuticals (NYSE: KG), in contrast, lost only a penny on the news. But King already has one abuse-resistant painkiller on the market and a second under FDA review. In contrast, Acura has no products on the market.

Drumroll, please
Like Hellenic Telecom, the other Fool favorite scraping bottom this week is also a debt-laden utility -- albeit of a different sort. Motley Fool Income Investor recommendation Exelon hit a 52-week intraday low of $42.78 on Friday, but Fools still get a warm tingle when they think of this electric company. Let's find out why.

The bull case for Exelon
All-Star investor Momentum21 declares Exelon worthy of ownership for its "value and dividend, and nuclear baby." (Nuclear babies? Is that a good thing?)

CAPS member fdude71 clarifies: "This is the biggest nuclear producer in the US. ... My quick analysis of the company shows it has manageable debt and it is generating 'significant' cash w/o issues. It can easily handle short term debt with cash available on the balance sheet. Long term debt is in line with expectations for a Utility company. At P/E of ~10 and ~2.2 Book Value I think we are getting in cheap on this energy play as consumption will eventually resume someday in the US."

To top it all off, the Fool's own TMFAloha credits Exelon with "nearly irreplaceable assets." (It takes forever to get permits for nuclear plants, and nearly forever to build them.) Plus, because they don't burn dinosaur bones to generate electricity, TMFAloha believes Exelon's nuclear plants offer us a "Free option on potential carbon credits."

Follow the money
Now, Exelon being a utility and all, I imagine it will appeal most to investors seeking steady, high-paying dividend yields -- and in this regard, Exelon doesn't disappoint. It pays 4.8%, putting it right in the middle of the pack of utility dividend payers -- equal to American Electric Power (NYSE: AEP), superior to Dominion (NYSE: D) at 4.4%, but below Duke Energy's (NYSE: DUK) generous 5.9% payout.

Even better, as CAPS' fdude71 points out, Exelon's "Dividend ... has been growing at about 10% average over the past 5 years... with a payout ratio of 'only' 53%. They can easily handle this and should continue increasing their distributions." By way of comparison, American Electric Power sports a payout ratio right down there with Exelon's (55%). But Dominion and Duke? Those two are pretty much maxed out: With 81% and 113% (!) of their annual income already earmarked for dividends, it's unlikely either one can grow its payout any faster than it grows earnings.

Foolish takeaway
If dividends are your thing -- and utilities are where you seek 'em -- it's hard to overestimate the value of a tiny payout ratio like the one Exelon sports. Most analysts predict we'll see only low-single-digit growth in this sector over the next five years (indeed, Exelon itself is pegged for flat-to-negative growth). But if Exelon has the ability to essentially double its payout anytime it likes, well, you could say the stock has a "potential yield" of nearly 10% -- and if that's the case, who even needs earnings growth?

Or that's how I look at the situation, at least. You, however, are free to look at it differently -- and on Motley Fool CAPS you can also tell the world what you see.