"Don't catch a falling knife," as the sages say. 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.

For the second time today, we're upending Mr. Market's kitchen drawers and watching the knives tumble. We've already sifted through the silverware on the NYSE. Now it's time to take a stab (pardon the pun) at bargain hunting on the Naz. As always, our guides in this endeavor are twain -- we start with the latest "New 52-Week Lows" list at WSJ.com, then crunch the numbers on investor sentiment at Motley Fool CAPS:


52-Week High

Recent Price

CAPS Rating (5 max):





Costco Wholesale  (NASDAQ:COST)




Cisco Systems (NASDAQ:CSCO)




Charles Schwab  (NASDAQ:SCHW) 




Hercules Offshore (NASDAQ:HERO)




Companies are selected from the "New 52-Week Lows" list published on WSJ.com on the Saturday following close of trading last week. 52-week high and recent price provided by Yahoo! Finance. CAPS ratings from Motley Fool CAPS.

Knives and knaves
On the NYSE, 507 listed stocks closed out the trading week Friday at their lowest prices in a year. Likewise on the Nasdaq, where 567 companies hit rock bottom on Friday. Despair is in the air.

But if there's one good thing about a broad-based market sell-off like this one, it's that you find a lot of terrific companies getting the ol' baby 'n' bathwater treatment. Tossed out on their rosy little bums, as if they were bums of another sort. You just know that some of these babies are gonna bounce right back once the suds subside.

Here at The Motley Fool, we've already yanked three bundles of joy outta the bath from the above list: Hercules Offshore (a Motley Fool Hidden Gems selection), Charles Schwab (from the Motley Fool Stock Advisor portfolio), and Costco (a dual Stock Advisor-Motley Fool Inside Value recommendation.) But from where I sit, there's one more stock on today's list that looks worthy of a Foolish lifesaver. That's why today, we'll be looking at ...

The bull case for Oracle
Late last year, PEG1765 called Oracle "the preeminent database out there for large industry and government" and noted that "it also has a strong consulting team. While Open Source is coming along, enterprise licenses are good, and so long as Oracle continues to work at those, they should maintain their lead, as enterprises like to have reliable, accountable support when software issues rise."

CAPS member Doughboy33 agrees, citing Oracle's "[s]trength competitively, on the balance sheet, in the cash flow statement and in the executive office." (Relative to the competition, Oracle boasts beefier operating margins than either IBM (NYSE:IBM) or salesforce.com, and comes very close to tying Microsoft (NASDAQ:MSFT) on this metric.)

And let's not forget its strength in the customer base. With 130,000 investors and counting, we're bound to have a few CAPS contributors who can offer firsthand insight into the companies they recommend. Case in point: aaachooo, who wrote in November:

I work in enterprise IT. Oracle is sticky. Companies are not replacing their [Oracle] database systems within the next 10-15 years. Companies are storing more data, deploying more enterprise applications. the oss mysql/postgresql might be making headway on the edge of network but no one is replacing oracle.

Yeah, I know. aaachooo may speak that lingo, but it's pretty much Greek to me. So let me translate the investment thesis on this one into a language we can all understand: value.

Right now, Oracle trades for a 13 price-to-earnings ratio. On the surface, this looks like only a fair price to pay for a firm that most analysts expect to grow its profits at 13% or so over the next five years. But in fact, Oracle's quite a bit cheaper than it looks.

Over the last 12 months, Oracle generated $7.6 billion in free cash flow -- 30% better than what it reported as "earnings," as such things are calculated under GAAP. If you value the company based on its ratio of enterprise value to free cash flow, the stock is priced at less than 10 times earnings. From this perspective, Oracle begins to look quite cheap.

Time to chime in
Cheap enough to buy? Well, that's for you to judge. Personally, I think the answer is "yes," but we'd really like to get your thoughts on the matter.

Got a sec to help us out? Click over to Motley Fool CAPS and make yourself heard. It's fun, it's free, and it just might make you famous.

Hercules Offshore is a Motley Fool Hidden Gems pick. Costco Wholesale and Microsoft are Inside Value recommendations. salesforce.com is a Rule Breakers selection. Costco Wholesale and Charles Schwab are Stock Advisor recommendations.

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. 480 out of more than 130,000 members. The Fool has a disclosure policy.