3 Highly Rated Stocks on Sale

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 it's 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 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 and offer you premium prices for your holdings, while 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)

China Fire & Security (Nasdaq: CFSG  )

(18.8%)

54.6%

*****

Accuray (Nasdaq: ARAY  )

(18.0%)

20.0%

****

Neutral Tandem (Nasdaq: TNDM  )

(5.5%)

(35.7%)

*****

Data from Motley Fool CAPS as of April 5.

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, let's take a closer look at whether opportunity could be staring us in the face.

China Fire & Security
While the first-quarter earnings rush will begin next week when aluminum giant Alcoa reports, China Fire's stock is still reeling from the disappointing fourth-quarter earnings it reported last month.

For the fourth quarter, China Fire reported earnings of $0.10 per share. Not only was this less than half of what the company reported for the fourth quarter of 2008, it was also below what analysts were expecting. Management chalked the shortfall up to a delay in signing the contract for the massive Wuhan Iron and Steel retrofitting project.

So should CAPS members rethink their five-star stance on China Fire? I'm not so sure. The company relies in large part on big sales of full fire protection solutions to industrial customers, so it's hard to expect that growth is going to come in a perfectly smooth fashion.

In fact, if this really was just an uncharacteristically soft quarter and the company has a good handle on earnings for 2010, the getting could be good right now with the company's 2010 price-to-earnings ratio below eight.

Accuray
If you're like me, Intuitive Surgical (Nasdaq: ISRG  ) is the first name that jumps to mind when it comes to robots helping save lives in hospitals. But CAPS members seem to think that Accuray should be on investors' radars when it comes to robotic medicine.

Accuray has developed a robotic radiosurgery system called the CyberKnife, which uses image-guidance technology and a compact linear accelerator to blast cancerous tumors with targeted radiation.

Pretty cool, right? Well apparently Varian Medical (NYSE: VAR  ) thought the same thing and late last year it received FDA clearance for its own radiation therapy system, the Trilogy Mx. An analyst at Soleil Securities thinks that the Trilogy Mx could be out within the next month and could provide some very stiff competition to the CyberKnife. As a result, he downgraded Accuray's stock to "sell."

As if that's not enough, Varian has a secret weapon in this battle: Accuray founder John Adler, who joined Varian as chief of new clinical applications just this month.

Combine all of this with Accuray's spotty history of profitability, and I'm not so sure I'm on board with CAPS members' optimism on this stock.

Neutral Tandem
Similar to Accuray, competition has been the recent concern for Neutral Tandem investors.

Neutral Tandem helps phone carriers such as AT&T (NYSE: T  ) and Sprint Nextel (NYSE: S  ) connect calls between their separate networks. The company currently has a patent in place around its core business of operating a managed tandem network. However, the U.S. Patent and Trademark Office recently agreed to re-examine the patent at the request of competitor Peerless Network.

While keeping competition at bay is always a primary concern, CAPS members don't seem too worried about the patent issue. CAPS All-Star Lituus gave the stock a thumbs-up shortly after the patent ruling, suggesting that "the patent was not a core strategic asset of the company" and calling Neutral Tandem's stock "a growth stock at a value price."

I've given one of these stocks a thumbs-up in my CAPS portfolio. But here's the important question: What do you think? Head over to CAPS and share your thoughts with the other 160,000-plus members.

Don't think these stocks are big enough opportunities? Fool Austin Edwards thinks he's got your shot to score big.

Sprint Nextel is a Motley Fool Inside Value selection. Intuitive Surgical is a Rule Breakers recommendation. The Fool owns shares of Neutral Tandem.

Fool contributor Matt Koppenheffer owns shares of AT&T, but does not own shares of any of the other companies mentioned. You can check out what Matt likes in CAPS by visiting his CAPS portfolio or you can connect with Matt on Twitter @KoppTheFool. The Fool's disclosure policy offers you one Schrute buck for reading this far.

 


Read/Post Comments (5) | Recommend This Article (15)

Comments from our Foolish Readers

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  • Report this Comment On April 06, 2010, at 9:55 PM, PauvrePapillon wrote:

    CAPS Players like Accuray because they understand four simple facts:

    1. Varian’s gantry-mounted co-planer radiation sprayers move in two dimensions and devices that move in two dimensions cannot possibly compensate for tumors which move in three dimensions regardless of how fancy a multi-leafed columator you add onto them.

    2. Only Accuray’s robotically controlled CyberKnife has six degrees of freedom; moves in three dimensions; can track, detect and correct for tumor movement in real time; is capable of both isocentric and non-isocentric treatment patterns; and is able to attack a tumor with 200 separately angled beams as opposed to the seven or nine beams employed by gantry-mounted devices... all of which adds up to far more radiation where you want it to go and far less where you don't want it to go.

    3. John Adler is not a secret weapon for Varian or anyone else. Adler’s defection to Varian is the result of a temper tantrum and long standing rivalry with Accuray CEO Euan Thomson. It has nothing to do with the technology of either company. Adler will do nothing to enhance Varian’s R&D efforts. He doesn’t even work in that department – and didn’t at Accuray either. Adler patented the concept for CyberKnife. It was Drs. Russell Schonberg (physicist), Joseph Depp (mathematician) and Mohan Bodduluri (engineer) who solved all the technical issues and actually built the thing. Adler has no idea how it works and couldn’t build a CyberKnife if you gave him a billon dollars, every engineer currently employed at Varian and 100 years to work on the project.

    4. Accuray is and will for the foreseeable future remain the undisputed world leader in Stereotactic Radiosurgery... not because they are the first movers or the most politically powerful or connected player in the space but because they have far and away the best SRS platform with no real competition on the horizon.

    For a more detailed discussion, see these entries from a radiation oncologist that works with both Accuray and Varian equipment…

    http://messages.finance.yahoo.com/Stocks_%28A_to_Z%29/Stocks...

    http://messages.finance.yahoo.com/Stocks_%28A_to_Z%29/Stocks...

  • Report this Comment On April 14, 2010, at 12:33 PM, PauvrePapillon wrote:

    The BIG LIE is revealed...

    Varian’s 14 April 2010 technology release must be archived as the single most audacious crock of bovine excrement ever lobbed into the medical device media.

    After all the pre-release hype, it turns out to be just another gantry-mounted, single plane radiation sprayer. It still relies on jiggering the patient under a coplanar arch of beams which have no way to move and hence no way to compensate for motion in three dimensions.

    That CEO Tim Guerin can maintain a straight face while calling this repackaged gantry-mounted 1950s radiation sprayer a “game changer” is significant. It means he can lie with the audacity of our current Comrade-in-Chief. Maybe Guerin is vying to be the next HealthCare Czar.

    Very telling indeed is that the only technical information released today by Varian is this 2006 study of its respiratory gating technique.

    Take note:

    1. There is nothing new here.

    2. This is old technology that doesn’t even work.

    3. Even the Varian paid researchers didn’t try to use this technique for radiosurgery. The title of the study is “A dosimetric analysis of respiration-gated RADIOTHERAPY in patients with stage III lung cancer”.

    http%3A//www.ncbi.nlm.nih.gov/pubmed/16722527

    Believe it or not, you can actually access this study with a link from Varian’s own press release. Wow, what do they think? That investors are going to buy into Varian’s fantasy of radiosurgery claims without ever reading the study? This is just incredible. As they say, “I’m not making this up.”

    For a more technical discussion of Varian’s big lie, please see these entries from a radiation oncologist that works with both Varian equipment and CyberKnife:

    http://messages.finance.yahoo.com/Stocks_%28A_to_Z%29/Stocks...

    http://messages.finance.yahoo.com/Stocks_%28A_to_Z%29/Stocks...

    Guertin has dumped in his nest, threaded his pooch and shot himself in the foot all in one pathetically inept and truth-challenged media event. Basking in the full glory of its “game changing” technology release (and with the DOW up 50 points this morning), Varian has yet to even break into positive territory while Accuray is up over 10 percent. This is not the reaction of a market still under the ether of Varian Kool-Aid. The 800-pound gorilla has just cried wolf – and been caught! Exit visas are imminent. Yes, they still have a lot of docs on their baksheesh or, excuse me, “research grant” payroll (John Adler, that’s you) but their whoppers are going to have a lot less resonance after today.

    Kudos to VP Investor Relations Tom Rathjen for pushing back hard at Varian’s overhyped repackaging of its gantry-mounted, single-plane-bound 1950s radiation sprayers.

    Now, to take full advantage of this opportunity to trash Varian’s credibility, CEO Euan Thomson needs to roll up his sleeves, take off the gloves, hit the investment conference circuit – as well as the print media – and underscore Tim Guertin’s Big Lie as exactly what is: just another in a long list and continuing program of Varian misinformation designed to confuse and mislead the market with respect to gantry-mounted radiotherapy machines versus the CyberKnife radiosurgery platform.

    There is more than money at stake here. The treatment decisions made my patients - and at least influenced by doctors - have life or death consequences. Varian’s behavior in this matter has been and continues to be despicable. Accuray’s response has been less than robust. Today’s market reaction tells us that Rathjen is doing his job – superbly.

    Now we need Thomson to take full advantage of his higher profile CEO position and hammer this home. This is an opportunity to twist the knife in Varian’s gut. Please, Euan, seize the day.

  • Report this Comment On April 14, 2010, at 12:35 PM, PauvrePapillon wrote:

    The BIG LIE is revealed.

    Varian’s 14 April 2010 technology release must be archived as the single most audacious crock of bovine excrement ever lobbed into the medical device media.

    After all the pre-release hype, it turns out to be just another gantry-mounted, single plane radiation sprayer. It still relies on jiggering the patient under a coplanar arch of beams which have no way to move and hence no way to compensate for motion in three dimensions.

    That CEO Tim Guerin can maintain a straight face while calling this repackaged gantry-mounted 1950s radiation sprayer a “game changer” is significant. It means he can lie with the audacity of our current Comrade-in-Chief. Maybe Guerin is vying to be the next HealthCare Czar.

    Very telling indeed is that the only technical information released today by Varian is this 2006 study of its respiratory gating technique.

    Take note:

    1. There is nothing new here.

    2. This is old technology that doesn’t even work.

    3. Even the Varian paid researchers didn’t try to use this technique for radiosurgery. The title of the study is “A dosimetric analysis of respiration-gated RADIOTHERAPY in patients with stage III lung cancer”.

    http%3A//www.ncbi.nlm.nih.gov/pubmed/16722527

    Believe it or not, you can actually access this study with a link from Varian’s own press release. Wow, what do they think? That investors are going to buy into Varian’s fantasy of radiosurgery claims without ever reading the study? This is just incredible. As they say, “I’m not making this up.”

    For a more technical discussion of Varian’s big lie, please see these entries from a radiation oncologist that works with both Varian equipment and CyberKnife:

    http://messages.finance.yahoo.com/Stocks_%28A_to_Z%29/Stocks...

    http://messages.finance.yahoo.com/Stocks_%28A_to_Z%29/Stocks...

    Guertin has dumped in his nest, threaded his pooch and shot himself in the foot all in one pathetically inept and truth-challenged media event. Basking in the full glory of its “game changing” technology release (and with the DOW up 50 points this morning), Varian has yet to even break into positive territory while Accuray is up over 10 percent. This is not the reaction of a market still under the ether of Varian Kool-Aid. The 800-pound gorilla has just cried wolf – and been caught! Exit visas are imminent. Yes, they still have a lot of docs on their baksheesh or, excuse me, “research grant” payroll (John Adler, that’s you) but their whoppers are going to have a lot less resonance after today.

    Kudos to VP Investor Relations Tom Rathjen for pushing back hard at Varian’s overhyped repackaging of its gantry-mounted, single-plane-bound 1950s radiation sprayers.

    Now, to take full advantage of this opportunity to trash Varian’s credibility, CEO Euan Thomson needs to roll up his sleeves, take off the gloves, hit the investment conference circuit – as well as the print media – and underscore Tim Guertin’s Big Lie as exactly what is: just another in a long list and continuing program of Varian misinformation designed to confuse and mislead the market with respect to gantry-mounted radiotherapy machines versus the CyberKnife radiosurgery platform.

    There is more than money at stake here. The treatment decisions made my patients - and at least influenced by doctors - have life or death consequences. Varian’s behavior in this matter has been and continues to be despicable. Accuray’s response has been less than robust. Today’s market reaction tells us that Rathjen is doing his job – superbly.

    Now we need Thomson to take full advantage of his higher profile CEO position and hammer this home. This is an opportunity to twist the knife in Varian’s gut. Please, Euan, seize the day.

  • Report this Comment On April 14, 2010, at 5:11 PM, PauvrePapillon wrote:

    Varian’s lead presenter at today’s press conference Professor Urs Martin Lutolof Chairman of the Radiation Oncology Department at University Hospital Zurich described TrueBeam as “Old wine – new bottle”.

    What!?

    Check your tape. I’m sure they will edit the transcript.

    This is the actual quote:

    “Old wine – New bottle”

    Note to Accuray CEO Euan Thomson: Please quote Professor Lutolof at every investor conference, every interview and every other opportunity possible.

    “We absolutely and without qualification, reservation or mitigation agree 100 percent with the clinician that Varian chose to unveil their new radiotherapy platform, Professor Lutolof of University Hospital Zurich: ‘Old wine, new bottle’.”

    How about a group photo of all Accuray employees wearing a polo shirt emblazoned with a Varian logo and the words: “Old Wine – New Bottle”? Can we get that on the Accuray website by Friday afternoon?

    After you use them for the photo, how about you send Tim Guerin all 400 plus “Old Wine – New Bottle” polo shirts? I’m sure he would appreciate that.

    Better yet, send them to John Adler.

  • Report this Comment On April 14, 2010, at 5:13 PM, PauvrePapillon wrote:

    Varian’s lead presenter at today’s press conference Professor Urs Martin Lutolof Chairman of the Radiation Oncology Department at University Hospital Zurich described TrueBeam as “Old wine – new bottle”.

    What!?

    Check your tape. I’m sure they will edit the transcript.

    This is the actual quote:

    “Old wine – New bottle”

    Note to Accuray CEO Euan Thomson: Please quote Professor Lutolof at every investor conference, every interview and every other opportunity possible.

    “We absolutely and without qualification, reservation or mitigation agree 100 percent with the clinician that Varian chose to unveil their new radiotherapy platform, Professor Lutolof of University Hospital Zurich: ‘Old wine, new bottle’.”

    How about a group photo of all Accuray employees wearing a polo shirt emblazoned with a Varian logo and the words: “Old Wine – New Bottle”? Can we get that on the Accuray website by Friday afternoon?

    After you use them for the photo, how about sending Tim Guerin all 400 plus “Old Wine – New Bottle” polo shirts? I’m sure he would appreciate that.

    Better yet, send them to John Adler.

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