"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:



52-Week High

Recent Price

CAPS Rating
(out of 5)

FormFactor (Nasdaq: FORM)




Duff & Phelps (NYSE: DUF)




China Hydroelectric (NYSE: CHC)




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

All aboard!
"Conductors" dominate the 52-week lows this week. Whether it's semiconductors you're after, or you're looking for companies that conduct financial transactions, or even electricity, Mr. Market has got a deal for you. But is it a deal you should accept?

CAPS members seem uncertain. Reviewing the comments our investors have been posting on the companies in our chart, we find that despite going public several months ago, China Hydroelectric has yet to garner a single pitch in its favor. The more seasoned Duff & Phelps, which went public in 2007, has more support. But with just five CAPS pitches penned in nearly three years, this banker isn't exactly setting Wall Street on fire, either. In fact, the most recent pitch in Duff's "defense" consists of just one word: "Hold."

Not so with our top stock this week, however. If investors seem discouragingly laconic in their praise for Duff & Phelps and China Hydroelectric, they're positively giddy about FormFactor.

The bull case for FormFactor
Down nearly 60% from its high, FormFactor's performance in recent months has been enough to scare away the most optimistic investors. But according to CAPS member AmericanGenius, that would be a mistake: "Mr Market has terribly misunderstoud the semi conductors capacity for making boat loads of cash. Its as if they don't remember life before the price war. Well folks, the price war is over and demand is high. FORM stands to have a huge northward swing once wall street finally figures it out."

Granted, FormFactor doesn't make chips itself. Rather, as CAPS member tytymhorau reminds us, this "California-based semiconductor small-cap produces the leading probe cards for bulk-testing DRAM and other memory chips."

But as an integral part of the semiconductor production supply chain, helping ensure the quality of chips produced by Intel (Nasdaq: INTC) and Spansion (NYSE: CODE), CAPS All-Star c118383 assures us that FormFactor will profit as "cyclic business about to pick up."

Microchips, big dreams
FormFactor has fared poorly during the downward leg of this cycle. The company earned not a penny's worth of profit in the past 12 months (but neither have rivals Verigy (Nasdaq: VRGY) or Advantest (NYSE: ATE).) FormFactor's also burning cash at an accelerating rate -- $54 million in negative annual free cash flow two years ago, rising to more than $95 million burnt over the past 12 months alone.

Hardly encouraging, I admit. But consider: At the top of the last cycle, in 2006, FormFactor generated more than $67 million in free cash flow. If and when the semiconductor cycle turns upward, as c118383 predicts, that would have FormFactor priced at the slightly more attractive valuation of just two times free cash flow, a multiple almost certain to expand.

As for whether FormFactor will survive to see that happy day, well, I rather expect it will. The economic forecast may call for continued stormy weather, but FormFactor already has more than $430 million in cash tucked away for a rainy day. That's sufficient to tide it over even if the current burn rate continues for four more years.

Foolish takeaway
Things look pretty bleak for FormFactor right now. But don't let appearances deceive you. With cash in the bank and a new face in the CEO's office, this company's got every chance to bounce right back, just as soon as economic conditions permit.

Or so say I. You're free to disagree. In fact, if you do disagree, I'd love to hear why. Drop by Motley Fool CAPS today, and tell me whether you think investing in FormFactor is good form or bad.

Intel is a Motley Fool Inside Value pick. FormFactor is a Motley Fool Hidden Gems choice. The Fool has created a covered strangle position on Intel. Motley Fool Options has recommended a bull call spread position on FormFactor. Motley Fool Optionshas recommended buying calls on Intel. The Fool owns shares of FormFactor.

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. 431 out of more than 165,000 members. The Fool has a disclosure policy.