"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 "New Highs and Lows" lists at WSJ.com:

 

52-Week High

Recent Price

CAPS Rating

(out of 5):

Elbit Systems  (NASDAQ:ESLT)

$64.20

$37.23

*****

Hormel Foods

$42.77

$26.56

****

Panasonic Corporation  (NYSE:PC)

$24.38

$11.94

***

Signet Jewelers  (NYSE:SIG)

$31.62

$7.83

**

Arbitron

$51.50

$14.03

**

Companies are selected from the "Nasdaq New Highs and Lows" list published on WSJ.com on the Saturday following close of trading last week. 52-week high and recent price provided by Yahoo! Finance. CAPS ratings from Motley Fool CAPS.

Knives and knaves
Ordinarily, when a stock falls on hard times, its popularity evaporates right quick. And yet, in a market such as the one we've been enduring these past couple months, everything seems to be falling. So I guess it should come as no surprise when we see only a couple of the stocks hitting 52-week lows getting panned in the above list, while everyone from Panasonic on up gets average to superior star ratings.

And speaking of stars, the most altitudinous stock of the bunch is one I've been wanting to look into for quite some time now. You've probably never heard of it, but Elbit Systems is a little Israeli defense specialist that's giving not just Motley Fool Rule Breakers AeroVironment (NASDAQ:AVAV), but even defense giants like Northrop Grumman (NYSE:NOC) and Boeing (NYSE:BA) a run for their money in the race to replace manned aircraft with Unmanned Aerial Vehicles.

So what makes little Elbit think it can run with the big dogs? We're about to find out as we examine ...

The bull case for Elbit Systems

  • alon2k5 introduced us to Elbit last year as "Israel's biggest publicly traded defense company. In a country that is counted in the 5 biggest exporters in this industry this means a lot. Add to this a big domestic market (in the form of the the Israel Defense Forces & Police) and you get a huge market to tap. Elbit management is very aggressive in pursuing new countries/customers, to this end, Elbit cooperates with various big names (e.g. Boeing, [Lockheed Martin (NYSE:LMT)], Thales etc.) and/or with local companies at the customer's country."
  • And of course international sales are good -- but UberGadfly urges us not to miss the domestic forest for the international trees here: "Three things to count on in my lifetime: death, taxes, and Israel will be at war. ... Elbit specializes in growth defense markets: unmanned vehicles and simulation software. ... 65% of revenues are collected in non-dollar denominations, providing a hedge against the declining value of the dollar."
  • And let's end with a word to those skeptics worried that an Obama administration might be tough on defense, endangering those revenues that are very dollar-denominated. Fellow Fool and CAPS All-Star TMFSarahGen suggests that "defense spending is a very easy way for governments to pump money into the economy without any headline alerts." Pretty sneaky, sis -- and perhaps prescient as well?

Speaking of money, you probably want to know how much an investment in Elbit would cost you, right? Well, you might be surprised. Right now, Elbit shares can be had for the low, low price of just 12 times earnings. (And because the quality of those earnings is high, the price-to-free cash flow ratio is similar.)

Granted, even this multiple won't look particularly cheap if Elbit achieves only the 10% long-term growth that analysts project for it. But if you look real close, you'll notice that "analysts" is actually a misnomer here. The growth rate that Yahoo! Finance has Elbit pegged for is based on the say-so of just two professional stock pickers. In contrast, AeroVironment -- a key Elbit competitor and one with significantly greater following on Wall Street -- is pegged for 20% growth. Suffice it to say that I expect Elbit to resemble the latter number more than the former. And if I'm right, that makes today's stock price on Elbit a steal.

Time to chime in
Of course, that's just my opinion. I could be wrong. Care to tell me where? Then here's your chance. Click on over to Motley Fool CAPS and tell us what you think.