"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."

So goes the thesis of my weekly Fool.com column "Get Ready for the Bounce." Therein, I run the 52-week-lows list compiled by Nasdaq.com through the "wisdom of crowds" meter that we call Motley Fool CAPS. And out the other end comes a list of stocks that have fallen so far, Foolish investors figure they're just bound to bounce back soon.

But is there a way to cash in on fallen angels who've plummeted even further? Perhaps. If a stock that has fallen for one year straight has headroom, then maybe a stock that's fallen even further, and longer, has room to come back even higher -- in which case, an apparently left-for-dead stock could offer us a drop-dead gorgeous entry price. We're going to test that thesis today, starting with five stocks that just hit their five-year lows:

 

Recent Price

CAPS Rating

(5 max):

CTC Media (NASDAQ:CTCM)

$4.00

****

DryShips (NASDAQ:DRYS)

$4.50

**

Boyd Gaming (NYSE:BYD)

$3.75

**

Motorola (NYSE:MOT)

$3.55

**

Internet Capital Group

$3.27

*

Companies are selected from the "New 5-Year Lows" list published on MSN Money on Thursday. CAPS ratings from Motley Fool CAPS.

Left for dead? Or drop-dead gorgeous?
Each of the stocks listed above has shed between 70% and 95% of its value over the past year alone. DryShips in particular has been utterly devastated by the economic storm, losing essentially all of its value in 12 months' time.

Accordingly, Wall Street's left 'em all for dead. Yet savvy investors, searching among the driftwood, think they've spotted one piece worth salvaging: Russian cable TV network CTC Media. Disney (NYSE:DIS), CBS (NYSE:CBS), or General Electric (NYSE:GE) it isn't, but CTC programming still runs on about 350 television stations throughout Russia, and its Domashny Network subsidiary reaches 230. CTC Media's stock may be trading at a five-year low, but it seems to me there's got to be some value in such a sizeable network. Read on to find out why CAPS members agree.

The bull case for CTC Media

  • NetscribeMedia introduced us to CTC Media early last year as "a Russian television network [whose] average audience share is 10.4% ... making CTC the fourth-most watched broadcaster in Russia and the third-most watched in its target demographic. ... The $3.2 billion Russian advertising market is one of the largest and fastest growing in Europe. Despite this rapid growth, the advertising spending in Russia, both on a per capita basis and as a percentage of GDP, remains low by international standards. This indicates that the Russian advertising market is still relatively in a nascent stage. This should help well-established companies like CTC to gain most of this favorable environment."
  • MagicDiligence agrees: "With the Russian ad market growing at 40% a year and still trailing former Soviet bloc countries in per-capita ad spending, there is a ton of organic growth here. Return on capital and free cash margins are outstanding." But MagicDiligence ends on a cautionary note: "Political and economic risks in Russia are large."
  • However, this is a concern that CAPS All-Star jfheisel addressed way back in 2006, noting that CTC is a: "Popular Russian TV network that is only involved in entertainment -- thus little chance of raising enemies in the Kremlin. Russian incomes are growing, ad rates should keep increasing, and CTC's channels look to be in a strong position to retain good ratings."

I can tell you from personal experience that when I worked in Russia a few years back, the Kremlin did indeed focus on bringing "political" media under its thumb. That said, regardless of their political persuasion, profitable businesses (in the oil and gas sector in particular) have also become targets.

So you can take this as bad news or good when I say: CTC Media is incredibly profitable. The company earned more than $170 million over the past year, and generated nearly as-impressive cash profits of $147 million. For a $600 million (market cap) company, these numbers yield the ludicrous valuations of about four times trailing earnings, and four times trailing free cash flow, respectively. Assuming CTC Media doesn't get taken over by the Kremlin -- or heck, even if it does, so long as outside shareholders are allowed to hold onto their shares -- I really don't see how CTC Media can fail to reward investors who buy at today's price.

Time to chime in
Of course, that's just my opinion. Click on over to Motley Fool CAPS and tell us yours.

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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 ranked No. 798 out of more than 120,000 members. The Fool has a disclosure policy.

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