7 Highly Rated Stocks on Sale

I am always looking for a good deal, whether that means buying an extra box of Cap'n Crunch when it's 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 wacky 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, offering you premium prices for your holdings. At other times, he'll be inconsolably 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:

Stock

30-Day Return

One-Year Return

Current CAPS Rating

Astronics (NASDAQ:ATRO)

(42.3%)

3%

*****

Accuray (NASDAQ:ARAY)

(36.9%)

(62%)

****

Webzen (NASDAQ:WZEN)

(24%)

(30%)

*****

Flotek Industries (NYSE:FTK)

(22.9%)

50.3%

*****

NVIDIA (NASDAQ:NVDA)

(11.7%)

0.6%

*****

InterDigital (NASDAQ:IDCC)

(11.7%)

(46.5%)

*****

Telefonica

(11.6%)

27.4%

*****

Data from Motley Fool CAPS as of Feb. 19.

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 Accuray.

Lasers and robots
As long as I'm channeling Ben Graham here, it'd be wrong to describe Accuray as anything other than speculation. The company is working on cutting-edge technology in a burgeoning area and -- though it's been profitable recently -- it has a solid history of generating losses.

However, as far as speculation goes, Accuray looks like a pretty fine specimen. The company's main product, which is impressively called the CyberKnife, is a robotic radiosurgery system that uses image guidance to track tumors and blast them with high doses of radiation. The CyberKnife guidance system is able to keep a beat on the tumor in real time and adjust for tumor or patient movement so that it can blast the tumor with "sub-millimeter accuracy."

Given how cutting-edge the company is and the fact that it has produced significant losses in the past, I was surprised to find its balance sheet in great shape. The company is holding nearly $190 million in cash with no debt, and it has shareholders' equity of $140 million. Not surprisingly, revenue has been growing very rapidly, and the bottom line has even turned black over the first six months of its 2008 fiscal year.

So what's the problem? Well, with big promises come big expectations. When the company recently announced its second-quarter earnings, it noted that the crunchy credit market is affecting business. It turns out that customers of Accuray's very expensive machines are finding it harder to obtain financing in the current market, and so Accuray thought it prudent to dial back its revenue outlook. It now expects 2008 to turn in sluggish top-line growth of 50% to 64% -- apparently not enough for some of its investors.

The company has been popular on CAPS, particularly among CAPS All-Stars. One All-Star, midas784, couldn't help but draw the comparison to another company that has found great success mixing robots with medicine:

[Accuray is the] next [Intuitive Surgical (Nasdaq: ISRG  ) ] in the making -- mark my words ... [Accuray] deserves a premium as it is a already established brand with over 100 installations world wide and 99% of them successfully treating tumors.

So do you think the recent drop has created a good buying opportunity? Or is there more downside ahead? Let the community know what you think -- head over to CAPS and share your thoughts with the other 83,000-plus players currently part of the community. Even if you'd prefer to pass on Accuray, you can check out a couple of the other stocks listed above or any of the 5,000 stocks that are rated on CAPS.

More CAPS Foolishness:


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