7 Highly Rated Stocks on Sale

I am always looking for a good deal, whether that means buying an extra box of Cocoa Puffs when they're on sale or pouncing on undervalued stocks. The idea that anybody would sell a stock for less than its worth may seem silly, but legendary value investor Ben Graham tells us, by way of allegory, how we can look out for these situations.

In The Intelligent Investor, Graham introduces readers to a crazy guy named Mr. Market. Mr. Market's game is to pay you house calls on a daily basis to offer to sell you interests in businesses he owns or to buy from you interests in businesses you own. Sometimes Mr. Market will show up at your door very excited and offer you premium prices for your holdings, while at other times he'll be totally depressed about the future and will offer to sell you what he has for as low as pennies on the dollar.

So to find some of the stocks that Mr. Market is depressed about, I've turned once again to The Motley Fool's CAPS investor community. Each of the companies below had been given a five-star rating (the highest) by our community of investors just 30 days ago:

As the table shows, these stocks are all still very well-regarded by the CAPS community despite their underperformance over the past month. While these are not formal recommendations, they could be a great place to kick off some further research. I'll even get you started with some thoughts on CRM Holdings.

A majestic stock?
I've had insurance on the brain lately, so I was interested to see an insurer hit this list. Specifically, CRM Holdings focuses on the area of workers' comp insurance. As pretty much anyone who has a job in the industrialized world knows, workers' comp is a scheme that was put in place to short-circuit messy legal battles when a worker gets hurt on the job. Similar to other types of insurance, workers' comp insurers collect premiums for subsuming the risk of having to pay medical and other expenses for injured workers.

While workers' comp is a huge market, it's not really the most attractive insurance segment for a variety of reasons, not least of which is that pricing in the industry is very cyclical.

What's notable about CRM is that the company started out primarily by collecting fees for providing administrative services to self-insured groups. Self-insured groups are groups of companies in a single industry that decide that, rather than paying an insurer to cover their workers' comp risks, they will pool their own funds and pay out claims from there -- and keep any excess funds. CRM provides services to these groups, such as helping form the pool, risk assessment, and claim reviews.

In 2006, the company bought Embarcadero, the parent company of Majestic, a traditional workers' comp insurance. While this move gives CRM more insurance risk, it will hopefully generate more investment income through the float the company can collect.

CAPS player Patrick6k has taken a look at the stock and concluded:

[CRM Holdings has] a nice pile of cash on hand, a thick slice of inside ownership, fat profit margins, and good double digit returns on assets and equity. Not to mention this baby has a single digit P/E and is in the discount bin according to my valuation work. With a conservative 10% EPS plugged into the formula I use, these shares should be selling around $13-$14.

So is CRM Holdings too risky? Or is it time to give it the thumbs-up? Let the community know what you think -- head on over to CAPS and share your thoughts with the other 29,000 players currently part of the community. Even if you'd prefer to pass on CRM, you can check out a couple of the other stocks listed above -- or any of the 4,500 stocks that are rated on CAPS.

For more CAPS coverage:

• The 5-Sigma Report
• Stocks of the Week
• 3 All-Star Stocks on Fire

Fool contributor Matt Koppenheffer does not own shares of any of the companies mentioned. You can check out Matt's CAPS portfolio here, or tune in to his CAPS blog here. The Fool's disclosure policy taught Mims what it means to be hot.