5 Top Stocks at Half-Price

• Email
• Share
• Print

You love buying your shirts when they go on sale. And who can resist a buy-one-get-one-free offer? So when our stocks go on sale, why do we bemoan their low prices?

Smart investors like Warren Buffett and Marty Whitman love it when their stocks are suddenly selling at bargain-basement prices. For them, these companies become no-brainer buys.

The investors in the Motley Fool CAPS community also like a bargain. Below, you'll find five companies whose shares are selling at least 50% below their 52-week highs, but which still earn high honors from our investor-intelligence database. Consider it a BOGO sale on stocks.

Stock	CAPS Rating (out of 5)	% Off 52-Week High
CapitalSource (NYSE: CSE)	*****	58%
Danaos (NYSE: DAC)	*****	57%
Excel Maritime (NYSE: EXM)	*****	53%
Headwaters (NYSE: HW)	****	56%
Pacer International (Nasdaq: PACR)	*****	73%

Naturally, we want you to look a bit closer at these stocks before buying. You can get low-priced appliances in the dent-and-ding section of your home-remodeling superstore, but their quality might not be so good. Same thing here: Make sure there's nothing seriously wrong with the company before you plug it into your portfolio.

Take two, they're small
Global trade has apparently been able to shake off the worst effects of the recession and has at last started to grow again, if the Baltic Dry Index is any indication. And it ought to be, as it measures the cost for shipping commodities around the world. After falling from a peak of 12,000 in 2008 to under 700 earlier this year, the index has mounted a fairly sustained recovery to around the 3,000 level.

That's better than the shippers themselves, which have climbed only 27% on average so far this year, while over the past 12 months they're up only 14%. Meanwhile, shippers like Excel Maritime and DryShips (Nasdaq: DRYS) have yet to stage much of a recovery at all. CAPS shows that these two are still at least 50% below their 12-month peaks.

Investors, though, are looking for continued improvement in the index to signal further growth in the shipping industry. CAPS member LynneKnapp believes Excel will stage a recovery as the Baltic Dry Index soars on better global trade conditions:

The Baltic Dry Index has established a bottom. The only question is the pace of global recovery, when and not if. Select Bulk Shipping stocks will show 500% to 1,500%, returning to previous price levels.

Say what you will
The commercial real estate market continues to look like a shaky bet at best, and it may yet cause this nascent economic recovery to collapse. That could doom commercial lenders like CIT (NYSE: CIT), which are already on the knife's edge of calamity, but CapitalSource may prove more resilient.

Although it's still heavily invested in the commercial markets, CapitalSource has been busily diversifying its way out of that morass, beginning with its purchase of some of the assets of Fremont General last year. Importantly, it only purchased the retail banking operations and didn't saddle itself with any of its liabilities. That bit of smart, timely dealmaking gave CapitalSource access to the bank's deposit-based funding, and to date it remains well-funded and capitalized well above regulatory minimums.

That doesn't mean it won't still face challenges. Rating service Fitch Ratings recently downgraded CapitalSource based on the expectation that its loan portfolio will suffer further deterioration. CAPS member dcsilver admits the legacy portfolio that CapitalSource carries will serve as a drag on performance, but believes there's no reason it otherwise won't still outperform:

First you start with the 5 star rating - then you add a management team with vision. Sprinkle in timing and a stock that has been oversold. When the economy recovers, the legacy loan portfolio issues will continue to hold this stock back from its glory days, but that won't stop this stock from hitting $10 sometime in 2010.

Have half a mind
It pays to start your own research on these stocks on Motley Fool CAPS. Read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made, all from a stock's CAPS page.

Sign up today for the completely free service, and tell us whether these stocks are twice as good at half the price.