"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 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 WSJ.com:



52-Week High

Recent Price

CAPS Rating
(out of 5)

Mueller Water (NYSE: MWA)




Dynegy (NYSE: DYN)




Conexant Systems (Nasdaq: CNXT)




Western Digital (NYSE: WDC)




Apollo Group (Nasdaq: APOL)




Companies are selected from the "New Highs & Lows" lists published on WSJ.com on Friday last week. 52-week high, recent price, and CAPS ratings from Motley Fool CAPS.

The menace of momentum
Momentum is a funny thing. Sometimes, once a stock starts trending down, it keeps on doing so for longer than it objectively "should." We saw a lot of such momentum-driven downward dives last week.

Let's start at the bottom with Apollo Group. Nothing new here, really. Continuing fears of congressional regulation of the for-profit education sector continued to pressure the shares, pushing Apollo to its year-long low. Western Digital and Conexant? While blissfully free from any legislative bull's-eye on their backs, both stocks continue to suffer investor contempt for their earnings outlooks from two weeks ago. For its part, Dynegy reported a quarterly loss last week, and promised more of the same through the end of this year.

Our top-rated stock this week, five-star Mueller Water, admitted to losing money in its fiscal third quarter. On the other hand, Mueller grew its sales. Doesn't the company deserve some credit for that? Many Fools think so.

The bull case for Mueller Water Products
Why buy Mueller Water? Simple, says CAPS member auntviv2: "because our infrastucture of pipes, valves and hydrants is deteriorating and will need replacing in the near future."

Dezertenergy provides some color: "There is an outrageous number of water-mains breaking every day and piping under cities are very old and need replacing. There will be enough business for any company involved in pipes, fittings, valves etc..."

Conclusion? "Any uptick in US infrastructure building," and Mueller Water will be a winner. So says CAPS member RobertJBanach. And I agree.

Got water? Sure. But do you have profits?
The stock's got potential. If and when the Obama administration delivers on its promise to put shovels to work rebuilding American infrastructure, a water infrastructure play like Mueller Water should prosper. But if I had a nickel for every time I read about a "story stock" that failed to deliver on its promise -- well let's just say my monthly water bill would be taken care of, with money to spare.

But what are the chances of Mueller actually delivering on its promise?

Pretty good, as it turns out. You see, while investors are busy fretting over the company's lack of "profit," as GAAP accounts for such things, Mueller's even busier churning out cash. Free cash flow for the past 12 months has amounted to nearly $60 million.

To put this in context, as a percentage of revenue, Mueller Water turned about 4.4% of its revenue stream into free cash flow, compared with 11.3% from more diversified industry giant (and Mueller rival) Tyco International (NYSE: TYC). Mueller is selling for a mere 8.1 times annual free cash flow -- a bargain if the company comes anywhere near fulfilling the 17%-plus annual growth rate that Wall Street forecasts for it over the next five years. Still, the company is sitting on a well of debt, to the depth of nearly $700 million.

Foolish takeaway
Fact is, if Mueller undershoots analyst targets by as much as half, it's still cheap. Granted, it may take some time for investors to realize this, and there's no way of knowing for certain how much time. But two things are certain. First, underground pipes aren't going to improve with age. Our need to fix and upgrade them will only grow with time. Second, Mueller is willing to pay you a tidy 2.2% dividend for your patience.

Sounds like a good deal to me, but what do you think? Tell us on Motley Fool CAPS.

Apollo Group is a Motley Fool Inside Value pick and Mueller Water is a Motley Fool Hidden Gems recommendation. 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. 569 out of more than 165,000 members. The Fool has a disclosure policy.