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7 Highly Rated Stocks on Sale

I am always looking for a good deal. I buy extra boxes of Cocoa Puffs when they're on sale, and I pounce on undervalued stocks.

The idea that anybody would sell a stock for less than its worth might seem silly, but legendary value investor Ben Graham tells us, by way of allegory, how we can find 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 every day, and he offers to sell you interests in businesses he owns or to buy from you interests in businesses you own. Sometimes Mr. Market shows up at your door very excited, and offers you premium prices for your holdings. Other times he is 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 those stocks that make Mr. Market weepy, I turn 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:


30-day Return

One-year Return

Current CAPS Rating

Sigma Designs (NASDAQ:SIGM)




Ceradyne (NASDAQ:CRDN)




Hardinge (NASDAQ:HDNG)












China Security & Surveillance Technology (NYSE:CSR)








Data from Motley Fool CAPS as of Feb. 26.

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

Tracking down disease
In my mind, doctors are really smart, and to have succeeded with the schooling and training that they've done takes a rare amount of dedication. But sometimes what's necessary is help getting a patient onto the correct treatment path, and that's where Gen-Probe comes in.

Gen-Probe pioneered a micro-organism detection process called nucleic acid testing (NAT). Without getting too far into the science of it -- and revealing why I didn't pursue biology in college -- nucleic acid testing is a method of tracking micro-organisms based on the presence of particular nucleic acids (a.k.a. DNA and RNA) in a sample. Gen-Probe's products are made to "attract" the nucleic acids that are particular to certain organisms, so a laboratory can tell when a disease organism is present.

This is certainly great stuff, and it hasn't gone unnoticed. The company took home the 2004 National Medal of Technology for its work using NAT in testing donated blood. Shareholders have done quite well, too, as the stock has charged ahead nearly 600% since the company was spun off from Chugai Pharmaceutical back in 2002.

More recently, though, the revenue outlook provided by the company disappoints Mr. Market. It wasn't far below Wall Street's expectations, but when you're trading at a 30-plus P/E multiple, the market tends to shoot first and ask questions later.

On CAPS, the stock has a strong following, including a perfect 53-and-0 record among All-Stars weighing in with an opinion. One of these All-Stars, pinorload, tagged the stock in March 2007, noting that "biological testing doesn't get interrupted by bad economies, especially when a company has elite technology." longshort87, another Gen-Probe bull, added:

[Gen-Probe has an] impressive portfolio of intellectual property related to nucleic acid testing and a solid operating record of transferring that IP into commercially successful products with recurring revenue streams. Rich pipeline of future products, $6/share of cash, zero debt, mid-high teens organic revenue growth. Also potentially an attractive takeover target for a larger diagnostics firm.

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 to CAPS and share your thoughts with the 84,000-plus players.

Even if you'd prefer to pass on Gen-Probe, you can read about the other stocks listed above -- or any of the 5,400 stocks that are rated on CAPS.

More CAPS Foolishness:

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12/31/1969 7:00 PM
GPRO.DL $0.00 Down +0.00 +0.00%
Gen-Probe, Inc. CAPS Rating: ****
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