Contrarian Shopping List

"We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful." -- Warren Buffett

Out of the quadrillions of quotations quarried from that most loquacious of quotationists, this one holds a special place in the hearts of Foolish investors. Are you looking to "buy low" so as to later "sell high?" If so, your best chance of getting that initial, low entry price comes when panicked sellers are unloading their shares at whatever price is on offer.

In today's column, we search the ranks of Wall Street's motivated sellers and note which stocks they're most frantic to unload. Therein may lie the makings of a contrarian investor's shopping list. But don't just take my word for it. Before you decide to go in through Wall Street's out door, check your thinking against the collective intelligence of Motley Fool CAPS investors.

Today's contenders include:

The problem with pessimism
The problem with going against the grain on Wall Street is that when professional traders get pessimistic, their grim outlook can become a self-fulfilling prophecy -- at least in the short term. The more desperate to abandon a stock institutions become, the lower the price they'll accept to get rid of it. And as their "ask" prices drop, the "bid" prices of buyers will fall in tandem, creating the very price decline that they feared in the first place.

Until the selling stops.

In through the out door
When it will stop is anybody's guess. But until it does, savvy investors have a chance to "get greedy" and snap up some bargains from these fearful sellers (if bargains they truly be). Which of the above stocks fits the bill? For the most part, CAPS players seem to agree with Wall Street's selling spree, but in a couple of instances, they're willing to give the stocks a chance -- and in one case, Main Street says Wall Street is just flat-out wrong. That case is Leadis Technology, a stock that's only recently garnered its 10th CAPS rating and "earned its stars."

Leadis is a maker of "mixed-signal semiconductors" used to run the displays of mobile devices such as cell phones and PDAs. The company may be unpopular on Wall Street right now, but CAPS players rate it above average. The reasons why remain a bit unclear, because only one CAPS player has penned a pitch on the company (read it here). From my own review of the company's financials, however, I see one big point in particular in Leadis' favor: Unprofitable and free cash flow-negative as it is, the firm has a truly massive war chest to sustain it until profitability is reached. In fact, fully $106 million of the firm's $122 million market cap is made up of cold, hard cash (and equivalents). I don't know if that's reason enough to buy the stock -- but I'd be extremely hesitant to sell a firm with that kind of a balance sheet.

But enough about my thoughts on the company. Now it's your turn. Is Leadis destined for greatness, or will it just keep burning away that cash cushion it's got? Log on to CAPS now, and tell us what you think.

Motley Fool CAPS: It's fun, it's free, and it just might make you famous.

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. 32 out of well over 21,000 raters. The Fool has a disclosure policy.