The Latest Losers

These are the times that try investors' souls -- or at least their itchy trigger fingers. A couple of months back, the 52-week-low lists were pretty sparse. But nowadays, there are dozens of names on them, each succeeding in the dubious feat of setting a new low for the trailing year. While that kind of thing sends a lot of people scuttling for the exits, it's a situation that we value types (also known as "cheapskates") like to see. After all, it's a lot easier to pick winners when there are more stocks on sale.

The trouble, of course, is sorting the opportunities for gain from the opportunities for pain. Before we try to do that, let's take a look at 10 of the more notable sinkers to make the low list this week.

The down-and-out crowd
For several of the companies above, the appearance here is nearly inevitable, given industrywide conditions and corresponding investor concerns. Home-builders like Hovnanian are all suffering the downturn fears. McClatchy is in old media, at a time when nearly everyone has written off newspapers for good. And bird prices have punished all the chicken producers of late, not just Gold Kist; fear of the arrival of avian flu isn't helping much, either.

But are we looking at one of those "great company in an unloved industry" situations that can make brave investors rich? I don't think so. Given the growing signs that the housing slowdown is real, I would simply not want to be a part of Hovnavian.

As for newspapers, there are good reasons why investors don't love them. Stagnant top and bottom lines mean there's little reason to own these stocks unless they get very cheap, and McClatchy isn't cheap enough. Sure, the company still turns almost 12% of every buck into real free cash flow. But in the absence of growth, I think its shares are worth more like $37 a pop.

The story is very similar at Gold Kist. The company tosses out cash, but over the past few years, there's been less and less of it. If you model any growth at all, it looks very cheap. But since there may not be any growth for several years, I'd expect to see this stock continue to drop. Get the price down toward book value, and I think investors should start paying attention.

Adopt the worst of breed?
For years, Gateway has struggled unsuccessfully to turn itself around. As of its latest results (a small profit) it may just barely be succeeding. That's why, though, it's the runt of the computer litter behind the likes of Dell, Hewlett-Packard, and maybe even Apple, I agree with my colleague Rick Munarriz that Gateway might just be a good value. After all, there's a decent backstop of more than a buck per share in cash. At an enterprise value of $575 million, it also seems to me that grabbing Gateway would be a fairly inexpensive way for some firm, stateside or otherwise, to acquire a decent brand and $3.8 billion in annual revenues.

Movie Gallery is another brutalized company, not only by competition from Blockbuster and Netflix, but also by the boatload of leverage it took on in order to acquire Hollywood Video. Today, the stock is down more than 25% after the company met with its bankers. (Perhaps it didn't go too well.) This is a textbook example of why investors need to watch out for certain kinds of debt. When a company can't cover the interest payments it takes on -- as occurred when Movie Gallery took on its $1.1 billion in loans -- look out below.

The one to watch
Expedia.com is definitely worth a closer look. Since being spun off from InterActiveCorp, it has bruised shareholders for a 30% loss. Yes, there are valid worries here about stiff competition from sites like Orbitz and the airlines themselves, not to mention the periodic tendency of the entire travel industry to take a dive.

But Expedia continues to turn out a lot of cash; even if I assume that it earns less than it does, then run a quick discounted cash flow model that applies a growth rate pegged to nothing more than the expected industry growth rate, I still come out with a stock that's trading for about 20% less than the current share price. I notice that some of Wall Street's Wise have similar estimates for the shares' real worth, yet have "hold" or "underperform" ratings on the stock. That's a bit nutty, but it's exactly the kind of nutty that enables us bottom-fishers to find and profit from the occasional deal.

If you'd like to see what looks cheap to The Motley Fool's bottom-fisher-in-chief, Philip Durell, a guest pass to Motley Fool Inside Value is just a click away.

Seth Jayson learned how to fish the bottom while hunting walleyes up dere in Minnahsodah. At the time of publication, he had no positions in any company mentioned here. View his stock holdings and Fool profile here. Netflix is a Motley Fool Stock Advisor recommendation, XM is a Motley Fool Rule Breakers pick, and Dell has been selected by both Stock Advisor and Inside Value. Fool rules are here.