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 (as you might say they did last week), their grim outlook can become a self-fulfilling prophecy -- at least in the short term. The more desperate institutions become to abandon a stock, 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 this latest market downdraft will stop is anybody's guess. But until it does, savvy investors have a chance to get greedy and snap up some bargains from fearful sellers (if bargains they truly be). Problem is, investors aren't at all certain that "bargains be" anymore. Investors give below-average marks to every company on today's list, with one exception -- James River Coal. Yet even it gets just a half-hearted three stars out of a possible five. Hardly a ringing endorsement.

But beggars can't be choosers. If James River is the best we have to work with, then we'll sail the stream we're given. Here's what our CAPS players have to say about James River Coal:

The bull case for James River Coal

• Our most detailed pitch in favor of James River comes from snoopyj, who writes: "Supply for coal is currently limited and will result in increased revenues from higher coal prices. ... Natural gas producers are still struggling with increasing its natural gas production  ... keeping gas prices high. Coal will remain the choice for energy simply because it's still cheaper and easier to obtain. The company is set up to monopolize the market on the east coast with Appalachian coal due to its proximity to population centers. This leads to much lower transportation costs compared to its peers on the west coast."
• malachirc thinks James River is a "Pure Value play. The physical amount of capital and coal they own is approaching [the company's] market cap value (if it hasn't exceeded it: I did the comparison when it was about 7 per share)."
• And while we're on the subject of the stock price, CAPS All-Star SmokeyJoeSmokin says: "Coal is cheap energy right now, and JRCC is among the cheapest. Typically I like the western coal producers such as BTU because the coal is more accessible and more abundant, but JRCC is a steal at these prices."

"A steal"? That's debatable, but there's no debating SmokeyJoeSmokin's point about JRCC being one of the cheapest coal producers out there. On average, companies in this industry fetch valuations equal to 2.7 times their annual sales. James River is priced at less than one-tenth that valuation.

Then again, most companies in this industry find a way to earn money, and James River is the exception to that rule. So far this millennium, the only year James River has netted a profit was the year it emerged from bankruptcy -- 2004. Before that, and ever since, it has lost money. The phrase "cheap for a reason" comes to mind.

Time to chime in
But the aim of this column isn't just to tell you what I think about Wall Street's rejects -- or even what our All-Stars are saying. We also want to hear what you know about the company. Can James River ride the tide of rising energy prices, or is this firm a total basket case? If you've got an opinion, we've got a place to voice it.

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

Meritage Homes is a Stock Advisor 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. 759 out of more than 60,000 raters. The Fool has a disclosure policy.