Fearful Stocks for Greedy Investors

"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. Once we've compiled this shopping list of potential picks, we'll check them against the collective intelligence of Motley Fool CAPS.

Today's contenders include:

Companies are selected from the "Institutional Ownership Down Last Month" list published on MSN Money on the Saturday following close of trading last week. Recent price provided by Yahoo! Finance. CAPS ratings from Motley Fool CAPS.

Wall Street vs. Main Street
Up on Wall Street, the professionals can't wait to unload these dogs, but down here on Main Street -- well, just call us the S.P.C.A. While admitting that some of these stocks have fleas, we take a much more nuanced view regarding their fortunes. Some of them could fly far (Eagle, for example) ...

... but not quite as far as China.

The bull case for Qiao Xing Mobile
The lone five-star stock on today's list hails from the Mysterious East, land of Xanadu, silk and, apparently, cellphones. It's there we find upstart cell phone maker Qiao Xing Mobile, hard at work thinking up new ways to give Motorola (NYSE:MOT) nightmares.

Tacomatight tells us this about Qiao Xing:

[It] is the largest SOE (State Owned Enterprise) dealing with electronics in China. They have several product lines including cell phones. [Qiao Xing] has a second teir brand of cell phone in China which are good-looking and allow people with less money (college students and country folk-awesome market) the opportunity to afford a cool phone. I live in Xi'an China and recently checked out their phones, nice looking. As a SOE they are backed by the cental government so can't fail in the short term.

And the long term? Well, CAPS All-Star cashsage tells us that "QXM is among the most profitable and cash rich companies" -- so that's a good start.

Fellow All-Star investor rijoker took a more extensive look at the company last month (read it all here), starting with the "P/E of only 2.6," proceeding through a string of similarly" great numbers," quality of the phones and of the advertising used to market them. This CAPS member concludes: "[F]rom everything I have learned, I feel this is a great buy and with the little concern to watch for I think the risk reward is in my favor."

As luck would have it, Qiao Xing just finished reporting a revised batch of fiscal 2008 numbers, so let's take a look at those. Cash on hand amounts to $426 million. Total debt amounts to under $174 million, but much of it is short-term borrowing. So, it would appear that the company has at least $250 million in net cash on its balance sheet -- considerably more than the company's $145 million market cap.

That alone seems to make the stock a compelling bargain. But wait -- there's more. Annual sales last year amounted to $315 million, which means that this company is selling for a price-to-sales ratio of less than 0.5. This would be understandable in an unprofitable company like Motorola, which carries a similar P/S ratio. But Qiao Xing boasts a net profit margin around 20% -- more profitable than high-tech smartphone makers such as Apple (NASDAQ:AAPL) and Research In Motion (NASDAQ:RIMM), each of which fetches a P/S ratio north of 3.0.

Time to chime in
To me, the valuation here just plain makes no sense, Fools. Either there's something terribly wrong with Qiao Xing -- something that doesn't show up in the financials, something that I'm missing entirely -- or else this company is the best investment opportunity on the planet.

Which one is it? You tell me.