"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 furthest. 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 Nasdaq.com:


52-Week High

Recent Price

CAPS Rating (5 max):

Portugal Telecom  (NYSE:PT)




ExlService Holdings (NASDAQ:EXLS)




Chartered Semiconductor  (NASDAQ:CHRT)




Reddy Ice Holdings (NYSE:FRZ)




Physicians Formula




Companies are selected from the "NASDAQ 52-Week Low" list published on Nasdaq.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
If there's one good thing about a broad-based market sell-off, it's that you find a lot of terrific companies getting the ol' baby 'n' bathwater treatment. Tossed out on their rosy little bums as if they were bums of another sort. You just know that some of these babies will bounce right back once the suds subside.

This week, however, most stocks on our venerable "bounce" list have stock prices only a mother could love. According to CAPS members, only one of the five is even worth considering adopting (and in fact, the folks over at Motley Fool Global Gains have already adopted it).

Are you interested? Then sit back, relax, and let our players tell you a little bit about ...

The bull case for Portugal Telecom
Writing back in December, CAPS All-Star MJKpayday called PT "a fairly valued telecommunications (cell phone) company operating mainly in the not-yet-saturated Portugal and Brazil markets ... and smaller investments in Asia, Africa, and Latin America." MJKpayday also liked PT's 6% dividend yield, which stands at 8.8% as of today. (Oh, and the stock is cheaper, too.)

nunopereira76 adds that PT has "a very solid CFO, considered one of the best in the european telecom companies."

Of course, the single best pitch regarding PT dates from April of last year, and comes from CAPS All-Star darkflame. Unfortunately, it's way too long to reproduce here in full -- but here's a short excerpt: 

I'm Portuguese !!!! Yes dear fans, I am. And as, probably, the best rated portuguese in CAPS I thought I should leave a pitch on this one. This stock has never been followed by Wall Street, until a fine day in February 2006 that a small portuguese telecom company ... less than 1/10 the size of PT , convinced some big spanish banks to loan them 11 billion euros and tried to buy PT...

If that doesn't pique your interest in reading the rest of what darkflame had to say, I'm afraid I have to diagnose you as incurably incurious.

But before you click through, allow me to toss a few numbers at you. PT sells for a P/E of 12. Weighed against its 10% projected long-term growth rate, that may not sound particularly cheap, but consider:

  • AT&T (NYSE:T) costs more (a P/E of 14), but is growing more slowly, at just 9%.
  • Verizon (NYSE:VZ) is even worse. It's got a 17 P/E and only an 8% growth rate.
  • Sprint Nextel (NYSE:S)? I'd love to tell you about that one -- but a company needs profits before it can have a P/E.

Plus, none of these alleged "peers" pays anything remotely approaching PT's mammoth 8.8% dividend yield. If you can stomach any of the American telecom majors, you should be absolutely famished for a piece of Portugal Telecom. This one's got definite bounce-ability.

Time to chime in
Of course, the aim of this column isn't just to tell you what I think about Portugal Telecom -- or even what other CAPS members are saying. We really want to hear your thoughts. Click on over to Motley Fool CAPS and tell us what you think.

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. 507 out of more than 115,000 players. The Fool has a disclosure policy.