"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." I run Nasdaq.com's 52-week-lows list through the "wisdom of crowds" meter that we call Motley Fool CAPS, generating 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's fallen for one year straight has headroom, perhaps a stock that's fallen even farther, and longer, has room to soar back even higher. In that case, an apparently left-for-dead stock could offer us a drop-dead gorgeous entry price. We'll test that thesis today, starting with five stocks that just hit their five-year lows:


Recent Price

CAPS Rating (out of 5):

Nam Tai Electronics  (NYSE:NTE)



Babcock & Brown Air (NYSE:FLY)



Skyworks Solutions  (NASDAQ:SWKS)



Fairchild Semiconductor  (NYSE:FCS)



Orexigen Therapeutics



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 55% and 80% of its value over the past year alone, and currently sits at or near its five-year low. Basically, Wall Street has left 'em all for dead.

But Main Street is taking a more discriminating view. Sure, CAPS members aren't too excited about Orexigen's money-losing ways, but they're progressively more sanguine about the single-digit P/Es at Fairchild, Skyworks, and Babcock -- and positively giddy over Nam Tai Electronics. So are we, in the spirit of full disclosure; Nam Tai is a Motley Fool Global Gains recommendation.

But what about the rest of Fooldom? What's got the CAPS community so excited about a contract electronics manufacturer in far-off Macau? Let's dive right into ...

The bull case for Nam Tai Electronics
We'll start with a few words from the ever-quotable MJKpayday, writing back in May:

How do you say cheap cell phone in chinese? Answer: NamTai. ... about 1.5 times tangible book value and under 6 (PE) times earnings. Why so cheap? Everyone is worried about competition and that's reasonable ... BUT, for the last 6 years revenue and income has been increasing and the company has always been profitable.

Competition isn't the market's only fear. The electronics market is in the dumper, as evidenced by disappointing news from Logitech (NASDAQ:LOGI), LG Display (NYSE:LPL), and even Corning (NYSE:GLW) in recent weeks.

As CAPS member skymutt2 commented last week:

business is lousy, sales have plummeted, management is a big question mark. But guess what-- they still have a great balance sheet and will survive this storm, and will be poised to generate lots of cash in the next up cycle. You buy these kind of companies when things look the worst and you sell them when business is going great. The kicker is that this company pay a regular dividend, and a big one at that. They could slash it in half and it would still be a huge dividend, and they have the cash to pay it either way.

In fact, Nam Tai's dividend has attracted the attention of several of our CAPS pitchers. CAPS All-Star LatePlay, for example, noted this past summer: "Tons of cash, Big yield, Huge [growth],Very cheap. It may not see much movement unless it becomes a takover target, but the dividend should take care of you."

But just how big is this dividend that everyone's talking about, anyway?

Hmm. 18%. OK, yep, that's big all right. So big you kind of have to expect Nam Tai will cut it at some point -- except that it doesn't need to. You see, dividends are costing Nam Tai slightly less than $40 million per year. But right now, Nam Tai is sitting on more than $240 million in cash. Technically speaking, if management were so inclined, it could run its business at breakeven for the next six years straight, never earning a penny of profit, and still have plenty of cash on hand to make every single dividend payment it has promised.

Of course, that's just the worst-case scenario. Nam Tai is making profits, and its cash stash is getting bigger, not smaller. The stock's selling for a P/E of just 4 right now, and over the past 12 months, Nam Tai generated some $42 million in free cash flow -- enough to pay the whole dividend and then some, with no need to draw down its bank account by a penny.

Personally, I think it's just ridiculous that a profitable, free cash flow-positive operator like Nam Tai is selling for less than the cash on its books -- but that's the kind of market we're in today, folks. Don't complain about it. Take advantage of it.

Time to chime in
Or don't. As always, the choice is yours -- as is the soapbox. Got a different opinion of Nam Tai? Clamber on up and tell us all about it.

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