When a stock such as Apple (Nasdaaq: AAPL) or Chipotle Mexican Grill (NYSE: CMG) is universally loved, you should think twice about buying in, lest you arrive as the euphoria starts to fade. Instead, look for stocks that aren’t being chased by the crowd. These stocks often hit a rough stretch, get shunned by many growth and momentum investors and soon find themselves being valued at a fraction of their former highs.

In this unforgiving market, there’s no shortage of lagging stocks. Some deserve to be shunned because business is likely to remain lousy, valuations don’t look attractive — even after a big sell-off — and few catalysts are in place for a rebound. But I’ve developed a list of stocks that should hold appeal. They’ve all fallen more than 50% from the 52-week high, are expected to post rebounding results in 2012, and most importantly, now trade for less than 10 times projected 2012 profits. Not only do these stocks possess considerable upside when business rebounds, but they also offer more downside protection if the market falls even lower, thanks to those low price-to-earnings (P/E) ratios.

 
 
A few stocks immediately jump out for attention. OfficeMax, (Nasdaq: OMX), which trails Staples (Nasdaq: SPLS) and Office Depot (NYSE: ODP) in the office supply retail category, is struggling with anemic sales growth. Yet as is the case with Office Depot, which I discussed in this article, management is at least doing a better job of controlling gross margins and operating expenses. OfficeMax just delivered a $0.07 quarterly profit, ahead of the break-even forecast. Is the company healthy? Not yet, but the sharp plunge in the stock appears to have run its course.

#-ad_banner-#I also noted that Axcelis Technologies (Nasdaq: ACLS) makes the cut. I came across this company when I saw that it was selling at a sharp discount to a rival that had just been acquired. [Read the original article here.] I came across Axcelis again when I profiled stocks selling below tangible book value. I profiled it again when it emerged on a list of companies with considerable insider buying. Now it re-appears as a “cheap P/E” play. Any time a stock hits multiple buttons, I sit up and take notice.

Lastly, I profiled shoe retailer Collective Brands (NYSE: PSS) a month ago, and shares have continued to weaken in the face of a tough stock market. Trading at just eight times projected 2012 profits — when those profits are being constrained by a lousy economy, should raise eyebrows. In a better economy, when people are buying more shoes, earnings per share (EPS) power could approach $2. Not bad for a $12 stock.

Here are two more names for you to consider…

1. Motricity (Nasdaq: MOTR)
Last fall, here’s what I had to say about this provider of wireless network software: “With shares now approaching $30, they clearly look overvalued. And we have stock cheerleader Jim Cramer to thank for that. He’s been talking up the stock recently, even though it now trades for more nearly seven times projected 2011 sales and more than 30 times next year’s profits.” Alas, shares peaked at $32 and can now be had for just $6.

With shares now in the refuse bin, they actually look much more attractive. When shares were popular, investors had unrealistic growth expectations for this company, which was seen as a great way to play the burgeoning wireless data industry. The company also took on a bit of hubris, making a $100 million acquisition of a European mobile advertising firm less than a year after going public itself. This was a tough pill to swallow for a small company, and investors grew to fear acquisition indigestion. Adding insult, Motricity then cautioned that growth expectations for 2011 — and the first quarter in particular — were too aggressive.

Not only did analysts need to lower growth assumptions, but they assigned lower multiples on that lower growth rate. Yet by many measures, the selloff appears overdone. Shares are simply too cheap now. For example, software stocks can often trade for up to four to six times revenue, thanks to very high gross margins, but Motricity trades for just 1.4 times sales. It’s worth noting that even as analysts have been lowering their profit forecasts, Motricity is still likely to post very strong profit growth in 2011 and 2012, making it hard to justify a P/E ratio of just six times projected 2012 earnings.

It’s unlikely Motricity will deliver sharp upside when quarterly results are released on August 9. So it pays to simply wait and listen to the conference call. If management can make a clear case that the next 12 to 18 months will deliver the growth analysts still expect, then this is a clear bargain stock.

2. Rubicon Technologies (Nasdaq: RBCN)
I remain a big fan of chip and solar equipment supplier GT Solar (Nasdaq: SOLR), which I profiled back in May. The supplier of furnaces used in the production of solar and semiconductor wafers has been piling up new orders at a furious pace. But analysts suspect some of that momentum for GT Solar is coming at the direct expense of Rubicon, a key rival.

Rubicon exploded on the scene in 2010, boosting sales nearly 300% to $77 million. Sales had been expected to double again in 2011, pushing per share profits up another 100%. But analysts are concerned the aggressive forecasts won’t be met, especially in 2012, because all vendors in the space may need to cut prices to win more orders. Let’s assume that’s the case. This is still a very cheap stock after losing half of its value in just three months. Rubicon releases second quarter results on Thursday, August 4. If management can make the case margins will see only moderate pressure in 2012, then value investors are likely to pounce on this beaten down name.

Action to Take –> All of these companies are wrestling with near-term challenges, but shares have been so mercilessly pummeled that any good news would quickly push shares back up. This is a solid group of names for further research, and I’m especially bullish on Axcelis Technologies and Collective Brands.

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