Stockpickr: The Top Stocks at Bargain Prices

When a stock is at a 52-week low, that tells you one of two things:

• The company is awful and might even be a scam; or
• Wall Street, as it is prone to do, has overdone the selloff, and now the stock's ready for a rebound.

Many value investors spend their mornings looking at the 52-week-low lists just to see if there are any hidden gems ready to be polished.

The benefit of the 52-week-low list on Stockpickr is that you can see at a glance all the hedge funds, mutual funds, and other investors that might own that stock. Although their holdings are subject to change, these guys are natural buyers of these stocks as they make new lows, and could potentially buffer future falls or even foretell a comeback.

Whole Foods Market(WFMI Quote) is a stock that has seen better days, as evidenced by the one-year chart below.

The company trades at 24 times forward earnings and just 12 times actual operating cash flows. In addition, analysts expect about 15% earnings growth over the next year and close to 20% revenue growth.

So why the share fallback? The company stated in its November report that growth might begin to slow. Earnings grew 339% last year, and growth obviously can't maintain that pace. But with the company still growing in double digits and with the enterprise value divided by cash flows at just 12 times, the market has more than discounted any slowing growth.

Financial services company UBS agrees with that thesis. UBS recently came up with a list of luxury stocks made up of companies that mostly sell to the affluent. This demographic has been growing faster than the U.S. economy over recent years (the well-known split between the haves and the have-nots), and UBS believes that Whole Foods is one of the companies in this category that will benefit. On a related note, Barron's put together a similar list it calls the Champagne Bucket.

Whole Foods Market (WFMI)

So the market has essentially assumed zero growth on Whole Foods. Any upside from that is a home run.

Another company near its 52-week lows is Caterpillar(CAT Quote).

Caterpillar (CAT)

With home sales and construction down, everyone assumes Caterpillar will bear the brunt, with lower sales of tractors and construction equipment. Meanwhile, commercial construction is up, and the company sells equipment to the mining industry, which is benefiting from higher oil prices.

Caterpillar trades at only 10 times next year's earnings and has a dividend of 2%, so investors will get paid while they wait. (For a contrarian view, investment guru Ken Fisher disagrees.)

Additionally, take a look at the portfolio for the TheStreet.com Ratings team's best stocks for 2007, which offers the reasons why each pick is included. The Ratings team includes Caterpillar in its Stockpickr portfolio. At 10 times next year's earnings, it's hard to see this company going much lower without someone mulling the largest leveraged buyout in history.

Motorola(MOT Quote) is another stock that has caved in recently.

Motorola (MOT)

Wall Street is worried about increased competition for Motorola's pride and joy, the Razr phone, not only from Nokia(NOK Quote), which is enjoying nice growth off of some of its recently released products, but also from Apple's(AAPL Quote) upcoming iPhone. However, it's worth noting that the Razr had a record quarter, even if CEO Edward Zander said he was disappointed in it on the recent Motorola earnings call.

It's also worth noting that Motorola's home-solutions business, which sells set-top boxes and DVR players, is only 8% of Motorola's sales right now. That number will be much higher as unit sales of DVRs and set-top boxes worldwide more than double over the next four years. Motorola is also gaining market share in China and India in the wireless handset business.

Bottom-fisher Prince Al-Waleed owns shares of Motorola, as does the Goldman Sachs Large Cap Value Fund.

Check out the full list of S&P 500 stocks trading near their 52-week lows. Also, to participate in or just view the debate on buying 52-week lows vs. 52-week highs, check out the Stockpickr forum.

Stockpickr tip of the day: Don't forget to check out the Barron's roundup we plan to post each Sunday in our blog. We present, in the Stockpickr format, portfolios relating to the top stories in Barron's, the list of stocks being pursued by activist hedge funds, the list of stocks (with additional color that we provide) that make up the top insider purchases, and the portfolios of the top funds mentioned in Barron's.

Here is the latest edition of the Barron's roundup, which includes the recommended picks of various Barron's roundtable members such as Marc Faber.