7 Highly Rated Stocks on Sale

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I am always looking for a good deal, whether that means buying an extra box of Golden Grahams 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 (no relation to the cereal) tells us, by way of allegory, how we can look out for these situations.

In The Intelligent Investor, Graham introduces readers to a wacky chap named Mr. Market. Mr. Market's game is to pay you house calls on a daily basis, offering 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. 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.

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 (out of 5)
Female Health	(32.4%)	79.3%	*****
Coventry Health (NYSE: CVH)	(10.2%)	(37.4%)	*****
VASCO Data Security (Nasdaq: VDSI)	(9.7%)	(22.1%)	*****
Guangshen Railway	(9.2%)	(7.8%)	*****
UnitedHealth (NYSE: UNH)	(8.9%)	22.5%	*****
Diana Shipping (NYSE: DSX)	(5.8%)	(24.6%)	****
Petrobras Energy Participaciones	(5.2%)	(32.1%)	*****

Data from Motley Fool CAPS as of Sept. 29.

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 further research. I'll even get you started with some thoughts on Coventry Health.

Why so blue?
Investors who have at least half an eye on the goings-on in Washington know that the waffling over health-care reform has thrown a massive cloud over the entire industry, making many investors reluctant to even sniff around health-care stocks.

While there is concern about the profits that insurers like Coventry, Aetna (NYSE: AET), and Humana (NYSE: HUM) make, there seems to be little reason to think that the dreaded single-payer system -- which would essentially wipe out private insurers -- will come to pass. Some of my colleagues at The Motley Fool think that the health-care stalemate could actually be a big investment opportunity, and some well-respected fund managers seem to be jumping on it.

But it appears that it's more of a valuation concern that has been pushing down Coventry shares lately. Though its trailing price-to-earnings ratio of 12 might not seem that expensive, it outpaces competitors like UnitedHealth (which is around nine) and Aetna (which is just over 10). In recent weeks worries over valuation have led firms like Goldman Sachs (NYSE: GS) to downgrade Coventry's shares.

What the bulls say
If CAPS members have been losing sleep over valuation, it hasn't shown yet, as the stock has a perfect five-star rating and more than 900 outperform calls. CAPS All-Star dibble905 gave Coventry's stock a thumbs-up nearly a year ago with some simple reasoning: "Health care isn't going away folks. That's really all that needs to be said."

But here's the important question: Do you think the recent drop has created a good buying opportunity? Or will the government end up clamping down on health insurance? Head over to CAPS and share your thoughts with the 140,000 members. Even if you'd prefer to pass on Coventry, you can check out a couple of the other stocks listed above or any of the 5,300 stocks that are rated on CAPS.

More CAPS Foolishness:

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