7 Highly Rated Stocks on Sale

I'm always looking for a good deal, whether that means buying an extra box of Frosted Flakes 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 wacky guy named Mr. Market. He pays you house calls every day, offering to sell you interests in businesses he owns, or buy from you interests in businesses you own. Sometimes Mr. Market will show up at your door very excited, offering you you premium prices for your holdings. At other times, he'll be inconsolably depressed about the future, ready 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 Motley Fool CAPS. Our community of investors gave each of the companies below a maximum five-star rating just 30 days ago:

Stock

30-day return

One-year return

Current CAPS rating

CryptoLogic (Nasdaq: CRYP  )

(13.7%)

(26.3%)

****

Immersion (Nasdaq: IMMR  )

(11.8%)

(21%)

*****

China Petroleum & Chemical (NYSE: SNP  )

(11.5%)

(8.1%)

*****

NRG Energy (NYSE: NRG  )

(10.2%)

(3.7%)

****

Itron (Nasdaq: ITRI  )

(9.4%)

42.7%

*****

O'Reilly Automotive (Nasdaq: ORLY  )

(9%)

(27.5%)

****

Melco PBL Entertainment (Nasdaq: MPEL  )

(8.8%)

(8%)

*****

Data from Motley Fool CAPS as of May 27.

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 Motley Fool Hidden Gems recommendation CryptoLogic.

Why so blue?
It's not like poker is getting less popular -- Johnny Chan and Chris Moneymaker have as much cachet as they've ever had. And there's no shortage of would-be card sharps who'd love to be playing poker and other betting games online. It's just that The Man is making it so darn hard on the online gaming companies.

The giddy excitement that once surrounded CryptoLogic has been replaced over the past few years by a jarring ride that has left the stock basically unchanged from late 2005. The company's most recent earnings report came in with the headline "CryptoLogic Builds Momentum in First Quarter of 2008." Unfortunately, the momentum it built came with net earnings that fell almost 60% from the prior year, missing analysts' targets by a long shot. The stock dropped 9% the day of the report, and it's continued sliding ever since.

What the bulls say
But of course, the earnings drop was not the momentum to which management referred, even many investors seem to have focused on that point. Earnings for the quarter were affected by severance payouts to a recently ousted management team, and the comparison to the first quarter of last year was a tough one because of a one-time benefit that the company recognized in 2007. Looking past the numbers, the company continues to release new gaming products, sign up new partners, and expand into new geographies. Could CryptoLogic finally be ready to break its run of cold cards?

On CAPS, Deandra88 is one of the 1,400 players who think that CryptoLogic may have an ace up its sleeve:

How long am I going to sit and watch this money maker? Not any longer. Well below $20 now, so time to make some money. No long-term debt in their portfolio and making solid in-roads into the Asian market. Gambling on line is spreading like wildfire and I don't see that changing in the future. This is a highly speculative investment, because competition in this market is high, but I can't resist these kinds of profit margins at this price.

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 105,000-plus CAPS players. Even if you'd prefer to pass on CryptoLogic, you can check out a couple of the other stocks listed above, or any of the 5,600 stocks CAPS rates.

More CAPS Foolishness:

Melco is a Global Gains selection. CryptoLogic is a Hidden Gems pick. Immersion is a Rule Breakers recommendation. Try any of our Foolish newsletters today, free for 30 days

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 into his CAPS blog here. The Fool's disclosure policy knows how to drop a stock like it's hot, but only when the company is truly cold.


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