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

Of all the Oracle of Omaha's orations, this one holds a special place in Foolish investors' hearts. When looking to bag a bargain, a panicked sell-off by jittery investors offers you a great chance to snap up stocks on the cheap.

In the short term, professional traders' pessimism can become a self-fulfilling prophecy. Desperate institutions lower their asking prices to get rid of a stock, prompting buyers' bid prices to fall in tandem, creating the very price decline that both sides feared in the first place -- until the selling stops.

Until it does, savvy investors can "get greedy," snapping up bargains from these fearful sellers. (Assuming they really are bargains.) In today's column, we'll see which stocks Wall Street's motivated sellers are most frantic to unload -- and whether you should buy 'em:


Recent Price

CAPS Rating
(out of 5)

The Knot (Nasdaq: KNOT)



American Superconductor (Nasdaq: AMSC)



Trina Solar (NYSE: TSL)



A123 Systems (Nasdaq: AONE)



Cytori Therapeutics (Nasdaq: CYTX)



Companies are selected from the "Institutional Ownership Down Last Month" list published on MSN Money after close of trading on Friday. Recent price and CAPS ratings from Motley Fool CAPS.

Up on Wall Street, the pinstripe-and-wingtip crowd can't sell these stocks fast enough. And truth be told, Fools don't seem so hot on their prospects either. Not one receives so much as a marginally bullish four-star rating on CAPS. The best that Fools seem able to say about the "top" stock on our list is that The Knot may not be too horribly overpriced. (And after lagging the rest of the stock market by nearly 40 percentage points over the past year, that's a backhanded compliment at best.)

But there's good news, too. I think it's possible, just possible, that investors are being too hard on The Knot.

The bull case for The Knot
Wall Street wasn't enthralled with the numbers The Knot released last month, no doubt about it. And yet, as fellow Fool Rick Munarriz pointed out at the time, the Knot was hardly alone in its troubles. Both Yahoo! (Nasdaq: YHOO) and AOL reported declining revenues in the final quarter of 2009, while The Knot at least posted a small uptick -- 3%.

Sure, the company reported a loss for the quarter (resulting from its writedown of the value of its 2006 WeddingChannel.com acquisition). But it's important not to lose sight of the things that -- according to CAPS member mistercube -- make The Knot great. Even in tough economic times, The Knot is still: "Doing things just the way a small company should: Expanding on its own ability to generate cash. The absence of debt on the books is this firm's main attraction."

Reviewing the company's 10-K filing, we find that The Knot did indeed generate nearly $10 million in free cash flow last year, a much more optimistic number than its reported $4.9 million GAAP loss would suggest.

Moreover, as CAPS member billwoodsa reminds us, "People will get married and buy things again." In support of which, Rick Munarriz made the insightful point last month that the 20% surge in diamond sales last quarter at Blue Nile (Nasdaq: NILE) bodes well for the consummation of numerous engagements in the near future.

Foolish takeaway
So long as The Knot remains the key online destination for couples contemplating wedded bliss, it's logical to assume that those diamond sales will ultimately bring revenue flowing its way. And in fact, even as Wall Street traders sell off the stock in response to last month's news, their analysts continue to project near-20% annual growth at the company over the long term.

When you marry this prospect to The Knot's current enterprise value-to-free cash flow ratio of less than 14, I have every confidence that The Knot will bounce back and proceed to wallop the S&P's performance going forward.

My advice: Do Knot give up hope. This stock will Knot let you down.

(Or will it? Has the Great Recession done in the marriage industry once and for all? Or is there a credible rival? If you've got a contrary view, we've got a place to make yourself heard.)

The Knot and Blue Nile are Motley Fool Rule Breakers recommendations. 

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. 568 out of more than 160,000 members. The Fool has a disclosure policy.