5 Stocks for the Contrarian Shopping List

"We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful."
-- Warren Buffett

Out of the quadrillions of quotations quarried from that most loquacious of quotationists, this one holds a special place in the hearts of Foolish investors. Are you looking to "buy low" so as to later "sell high"? If so, your best chance of getting that initial, low entry price comes when panicked sellers are unloading their shares at whatever price is on offer.

In today's column, we search the ranks of Wall Street's motivated sellers, and note which stocks they're most frantic to unload. Therein may lie the makings of a contrarian investor's shopping list. But don't just take my word for it. Before you decide to go in through Wall Street's out door, check your thinking against the collective intelligence of Motley Fool CAPS investors.

Today's contenders:

The problem with pessimism
The problem with going against the grain on Wall Street is that when professional traders get pessimistic (as you might say they did last week), their grim outlook can become a self-fulfilling prophecy -- at least in the short term. The more that institutions become desperate to abandon a stock, the lower the price they'll accept to get rid of it. And as their "ask" prices drop, the "bid" prices of buyers will fall in tandem, creating the very price decline that they feared in the first place.

Until the selling stops.

Mortgage madness
It doesn't take much more than a quick skim of today's list to see that Mr. Market has been selling financials with abandon, Helicopter Ben Bernanke's last-minute money-drop notwithstanding. Investors, too, are leery of taking the bait and buying the mortgage bankers. Every one of them on today's list gets the CAPS booby prize of a solitary star.

What stock persuades CAPS investors to take the opposite side of Wall Street's trade? One that hasn't met a subprime borrower in its life: Motley Fool Rule Breakers pick Akamai Technologies. (To learn more about the company and why we recommended it to our readers two years ago, try out Rule Breakers for 30 days, free of charge.) The Internet traffic cop gets four stars on CAPS, and a thumbs-up from more than 90% of All-Star investors surveyed. Let's find out what they have to say about it:

The bull case for Akamai Technologies

• The Fool's own TMFPlatoish starts us off with a brief history lesson: "Akamai is the poster child for dot-com implosions rising from the ashes. It was just a case of a great idea, great technology, and good management coming to market with a product that was really still in search of someone who needed it. They hung in their and continued to build out their infrastructure. Three events (some might argue there are more) served to suddenly make them relevant again.
  1.) Microsoft (NASDAQ:MSFT) got serious (well at least more so) about providing security patches and updates for their products in an easily accessible on-line manner.
  2.) Apple (NASDAQ:AAPL) found a way to make it easy to legally download music and content to a new device that became ubiquitous.
  3.) The broadcast and cable networks decided that if they were going to remain relevant, they better get with the program and deliver content over the Internet, as well as their traditional mediums."
  
  
• And now that Microsoft and Apple have laid the groundwork for Akamai's success, what happens next? Persuter dusts off the ol' crystal ball and soothsays: "Akamai stands to gain from more bandwidth usage, especially more streaming video. ... Akamai is more or less the only real caching and streaming solution for major content providers, and as our bandwidth glut from the late 90s runs out, and high-bandwidth applications like IP TV and YouTube (as well as software-as-a-service and grid computing) ramp up, Akamai will continue to be deluged with money."
  
  
• So if its future is so bright, why is Wall Street selling Akamai? Mgigliani explains: "Market overreacted to company not 'beating' market expectations for another consecutive quarter. However, the company's fundamentals remain very strong with year on year growth in the double digits and a growing underlying market. No doubt a fundamentally strong pick. "

Fundamentally strong -- no doubt. Akamai has a good $155 million in net cash on its balance sheet, grew its earnings greater than 90% last quarter, and has a 14% profit margin. But "strong" and "cheap," rarely travel hand-in-hand. Even after its sell-off, Akamai has a troublingly high P/E (71) and nearly as bad a price-to-free cash flow ratio (64). Although analysts expect rapid growth of about 30% per year to continue over the next five years, I have to wonder whether even that pace will suffice to reward shareholders who buy at today's prices.

Time to chime in
But the aim of this column isn't just to tell you what I think about Wall Street's rejects -- or even what our other CAPS players are saying. We also want to hear what you know about the company. Did Wall Street's wizards overreact to an earnings miss, or simply "suffer" a moment of clarity and realize just how much they were being asked to pay for this stock? In other words, is Akamai's sell-off an opportunity, or just a portent of more sell-offs to come? Whichever way you lean on the issue, if you've got an opinion, we've got a place to voice it.

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

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. 177 out of more than 60,000 total players. The Fool has a disclosure policy.