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 frantic 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 include:

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.

Wall Street may hate these stocks, but here in CAPS-land, investors are sharing the love.

And sharing it equally, as it turns out -- every stock on today's list rates an above-average four stars. But while that's pleasing to the eye, it does pose a bit of a problem for your humble Foolish author: Which of these four equally loved stocks shall we profile today?

Here's a crazy thought. How about we look at a company suffering from the twin downturns of the global commodities bust and the Boeing (NYSE:BA) machinists' strike? Can't go wrong with good news like that, huh?

The bull case for RTI International Metals

• dexion10 introduces us to RTI as: "a levered play on Boeings 787.. Airbuses new planes, and [Lockheed Martin (NYSE:LMT)] joint strike fighter... All uses lots of titanium and RTI has UP TO 80% of it's capacity forward sold to them. Boeing's current strike is creating a buying opportunity for the aviations metals group. I am going to scale into positions as the strike continues... RTI is my first long... if the stocks go lower I'll add [Titanium Metals (NYSE:TIE), Allegheny Tech (NYSE:ATI), and Precision Castparts (NYSE:PCP)]. Today the stock is trading at 10x next years earnings which could prove to be the trough earnings for the aviation build cycle. RTI has insider buying. A great Balance Sheet and smart institutional owners..."
• capitalgorilla adds that: "RTI has longterm agreements with Boeing AND EADS/Airbus as well as UTC/Bell and Bombardier to supply Titanium what seems beyond their current capacity long term (=2-5 years down the road) once new B787/Airbus heavy in Ti commercial aircraft builds grow."
• Meanwhile, CAPS All-Star huddaman praises RTI's: "low p/e, stable earnings, with modest growth expectations," predicting: "P/E could double or even tripple, along with the stock."

Now, it's worth pointing out that titanium companies are in the doghouse right now. Thank the global economic slowdown for that. Thank the aforementioned commodities bust. Last but not least, thank Boeing and Airbus; before RTI can profit from selling titanium to the plane makers, these guys need to figure out how to actually build a plane on schedule.

That said, there may be something to dexion10's suggestion that RTI's at its nadir now. With its P/E scraping the number 5, it's hard to imagine the stock getting much cheaper than it already is.

By now, you all know my fixation on the metric of free cash flow. And before you ask, yes, I am worried that RTI is burning cash. But the simple reality here is that RTI does occasionally burn some greenbacks, yet always seems to pull out a profitable year after dipping into the red. If today's situation is truly temporary -- if, all evidence to the contrary, Boeing and Airbus eventually figure out their supply chain issues and get some of their super-duper new fuel-efficient planes built -- I expect to see RTI emerge into the black once again. Meanwhile, the company's sitting on a fair-sized pile of cash, which looks to me more than sufficient to tide it over until the free cash flow-tide turns.

Time to chime in
It's not easy being greedy in a market as scared as this one. But is RTI's price low enough to tempt you yet? Or are you waiting to see a couple more "Mondays" to knock the price down to something undeniably dirt cheap?

Click on over to CAPS and tell us what you think.

On Oct. 7, 2008, Fool Co-Founder David Gardner and his Motley Fool Pro team will invest $1 million in a portfolio designed to help you make money in any market. In the coming weeks, the team, relying heavily on proprietary CAPS "community intelligence" data, will establish long and short positions in a broad range of securities, including common stocks, publicly traded put and call options, and exchange-traded funds (ETFs). To learn more about Motley Fool Pro and to receive a private invitation to join, simply enter your email address in the box below.