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 eager 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:

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.

Professional investors are selling these stocks hand over fist, but who's taking the other side of the trade?

We are. Individual investors in general, that is. Wall Street's Wise Men seem to think the world can get along without oil and gas, iron and copper, and the ships needed to move them from Point A to Point B. But Fools know better -- we're giving every stock on this list above-average ratings.

And yet, as much as the CAPS community loves its commodities, the top stock on today's list has precious little to do with the sector. Rather, Insight Enterprises focuses on another hated sector in today's market: computers. PCs, printers, servers -- you name it. If small, medium, or large businesses need it to run their IT departments, Insight sells it. But why, precisely, do Fools believe this is a good business to be in? Let's read on and find out.

The bull case for Insight Enterprises

• JPresbrown starts us off with a June 2008 observation that Insight runs a: "Solid business with good value measures - low price to sales ratio, low P/E ... Recent strong insder buying too." (Insider buying that has continued into November.)
  
• In 2006, marcmac22 praised Insight for purchasing: "a leading business software provider (Software Spectrum) from [Level 3 Communications (NASDAQ:LVLT)]. This makes them a dominant force in the technology sector because they can provide customers Hardware, Software, and Service needs. Whereas competition such as Dell (NASDAQ:DELL) and CDW are specialists in one or two of the areas. Not all 3."
  
• But perhaps the best insight on Insight comes not from a bull, but a bear. CAPS member murat1769 calls Insight a: "sleeper value" in search of a catalyst. Writing last summer, this investor predicted that Insight would "underperform the market for one basic reason - that it's marketing strategy is geared toward businesses and not toward retail purchases. So it is not a household name." But investing isn't a popularity contest, and in the long run, murat1769 sees the following advantages in Insight: "in the wholesale computer part market they are ranked number 4 behind [Ingram Micro (NYSE:IM)], TechData and merisel. They have purchasing power way above both Dell and CDWin that they can access any of the warehouse supply lines of the aforementioned big 3 and ship directly from those warehouses, through their billing system. a tremendous advantage to provide customer service and next day shipments."

Which all sounds pretty good, I'll admit. But what has Insight so down in the dumps these days? Maybe it's the company's lack of profits. Thanks to a massive $314 million goodwill impairment charge taken in the June-ended quarter, Insight currently sports a negative P/E ratio. But I think that's misleading.

Fact is, Insight is still racking up profits where it counts: on the cash flow statement. There we find a good $30.4 million in free cash flow generated over the past 12 months. Weighed against the firm's $184 million market cap, that gives the stock a quite attractive price-to-free cash flow ratio of just 6.0. Combine that with the fact that the stock's selling for about half its tangible book value, and I think you've got yourself a viable buy thesis here.

Time to chime in
On the flip side, Insight also carries a hefty slug of debt -- $331 million against cash on hand of just $72 million. Mr. Market seems to be leery of debt-laden shops in the current recession, and, its apparently cheap valuation notwithstanding, this debt load makes me wary of investing in Insight.

But perhaps you're a braver Fool than I? If so, then here's your chance to make your case for why Insight is worth owning despite the debt. Click on over to CAPS today, and let us know what you think.