Get Ready for the Bounce

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"Don't catch a falling knife," as the old saw commands. (Pardon my mixing a cutlery metaphor.) 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. That's where Motley Fool CAPS comes in.

It's been a while, but thanks to last week's sell-off, we once again have a chance to stand beneath Mr. Market's silverware drawer in hopes of snagging a bargain. Let's meet today's contenders:

Company

52-Week High

Recent Price

CAPS Rating(out of 5)

OmniVision Technologies (NAS: OVTI) $37.04$12.33*****
Pan American Silver (NAS: PAAS) $43.06$24.01****
Silver Standard Resources (NAS: SSRI) $35.94$13.68****
Frontier Communications (NYS: FTR) $9.84$5.30***
Toyota Motor (NYS: TM) $93.90$63.56***

Companies selected from the list of stocks hitting new intraday 52-week lows as reported on finviz.com. Recent price and 52-week high provided by Yahoo! Finance. CAPS ratings from Motley Fool CAPS.

The week in weak stocks
Wall Street knocked investors for a loop last week, with the Dow Jones Industrial Average (INDEX: ^DJI) dropping 3% over five trading days. That was bad ... but these stocks managed to do even worse.

What went wrong? It wasn't always clear. Toyota's stock is scraping a 52-week low, despite Kelly Blue Book's having just declared that Toyotas hold their value better than any other car sold in the United States, and despite the fact that Toyota just opened a new car plant in Mississippi to build more of these ultra-popular horseless carriages.

Frontier Communications inked a wireless resale agreement that allied it with industry behemoth AT&T (NYS: T) . Wall Street analyst Jefferies thought that news was good enough to recommend buying Frontier stock Thursday, but other investors disagreed and have sent shares lower ever since.

Pan American and Silver Standard? On one hand, the stocks' weakness seems logical, considering how silver prices declined last week. On the other hand, silver prices are about 20% above their lows of the year, yet the stocks are sitting at their trough valuations for the year. Not much logic there.

But perhaps the strangest occupant of this week's "52-week low club" is image-sensor maker OmniVision. Long the camera-chip supplier to Apple's iPhone, OmniVision got a black eye last month when it was revealed that Apple had begun buying camera chips from Sony as well. Last week, the company warned that this loss of exclusivity would hurt revenues in the upcoming second fiscal quarter -- sparking a sell-off. But was this reaction actually an overreaction? A lot of Fools think so.

The bull case for OmniVision Technologies
CAPS member rbmoore2, upon discovering OmniVision in the bargain bin, wrote excitedly about having "just doubled my position as it was at 52w low."

And why shouldn't rbmoore2? After all, as fellow CAPS member ebartel writes, "every cell needs a camera." And Apple is hardly the only game in town. OmniVision also supplies its chips to contract manufacturers Nam Tai Electronics, Taiwan Semiconductor, and Chicony Electronics.

With a strong customer base in place, and "solid financials, solid products" to boot, All-Star investor nonzerosum tells us that OmniVision is a buy.

OmniVision: a value in any language
I agree. The numbers here are simply irresistible.

Sure, the loss of exclusivity in its supply relationship with Apple was a blow to OmniVision's prestige. But it's hardly bad enough to justify the sell-off we've seen. Today, OmniVision shares can be had for just 5 times earnings. Yet they're expected to grow earnings three times as fast as that -- at a 15% annual rate over the next five years.

How good is the value here? Well, if analysts are right about the growth rate, then in just four years OmniVision will be earning $261 million in annual profit. To put that in perspective, if you net out OmniVision's cash reserves, the enterprise value on the stock today is just $242 million. In other words, in just four short years, this company could be earning more than the current market valuation of its business ... in profits ... every year.

Foolish takeaway
Are you willing to roll the dice for the chance to earn a 100% return on your investment, every year from here to perpetuity? I am. In fact, I'm so enthused about OmniVision's valuation today that I'm going to run right over to Motley Fool CAPS and rate this stock an "outperform." Feel free to follow along.

Or not. OmniVision isn't the only superb tech bargain we've discovered amid the market's recent sell-off. Check out our new -- and free! -- report, and we'll clue you in on5 Stocks The Motley Fool Owns -- and You Should, Too.

At the time this article was published Fool contributorRich Smithowns no shares of (nor is he short) any company named above. You can find him on CAPS, publicly pontificating under the handleTMFDitty, where he's currently ranked No. 302 out of more than 180,000 members.The Motley Fool owns shares of Nam Tai Electronics and Apple.Motley Fool newsletter serviceshave recommended buying shares of Apple and Nam Tai Electronics and creating a bull call spread position in Apple. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool has adisclosure policy.

Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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