3 Top Stocks at Half Price

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 or 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, apparently. Below, you'll find three companies whose shares are selling at least 50% below their 52-week highs, but that still earn high honors from our investor-intelligence database. Consider it a BOGO sale on stocks.

Company

CAPS Rating (out of 5)

% Off 12-Month High

American Oriental Bioengineering (NYSE: AOB  )

****

57%

Harris & Harris (Nasdaq: TINY  )

*****

54%

Universal Travel Group (NYSE: UTA  )

*****

63%

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
Traditional Chinese medicine makers have taken ill. Both China Sky One Medical (Nasdaq: CSKI  ) and American Oriental Bioengineering have been cut in half, Tianyin Pharmaceutical (NYSE: TPI  ) is off 40%, and even Tongjitang Chinese Medicines has lost a quarter of its value.

The Chinese health-care market is undergoing change as the government looks to improve access in rural areas of the country. Both prescription and over-the-counter drug makers ought to do well in having new markets opened to them, but it's a highly fragmented industry and changing habits isn't an easy task. Although American Oriental is trying to create a brand for its medicines, getting people to purchase at a drugstore what they've concocted naturally for thousands of years might be an uphill climb.

Investors also have to overcome the hurdle of the opaqueness of Chinese practices. AOB confused a lot of investors with slapdash acquisitions, questionable preferred stock offerings, and getting involved in pricey real-estate deals. Then when you more recently miss earnings estimates by a wide margin, it's a wonder American Oriental remains so highly rated.

For CAPS member cig2010 it has to do with a strong balance sheet featuring lots of cash and a management team investing in the company:

Although top-line growth is steady and solid, I think short term earnings are being affected by long term investments into R&D (to add new and improve existing products) and the new research building, but will pay off over the long haul starting in late 2010. Patience will be important, if you're looking for a 3-5 year investment horizon for a value play with long term growth prospects in China.

A reserve player
Like biotech investor Rodman & Renshaw nanotech VC Harris & Harris has an exit strategy to realize the profits from backing its tiny startups. Problem is, the capital markets and financial upheaval have gotten in the way. They need follow-on financing, which has been difficult as tight credit policies mean a dearth of new money.

That's causing Harris to turn to the public markets, to find new investment ideas anyway. It says investors shouldn't have to wait so long to get a return on their own investment, so it is going to look at promising publicly trade microcap stocks, companies with capitalizations under $50 million, to be able to churn out results for investors on an annual basis.

There's risk in that, as CAPS member Ak66 notes, as the shallow end of the market capitalization pool has been out of favor, but that's also where Harris & Harris will find the most reward:

Solid, well-run company with several solid investments. Small stocks and IPOs are currently out of favor, so this stock has slumped.

This stock may take a while to catch on, but has tremendous upside.

With friends like these
Online travel agent priceline.com (Nasdaq: PCLN  ) blew away its earnings numbers showing tremendous growth overseas, particularly in Asia, where its Agoda service continues to gain traction. However, that's really exclusive of China, which means that Ctrip.com (Nasdaq: CTRP  ) and Universal Travel Group can cement their own gains before priceline makes a bold move there. Right now priceline has been focusing on Thailand, Malayasia, Singapore, and Hong Kong, and should it move onto the mainland, it may face stiff competition.

CAPS member bwmac likes Universal's prospects there, which puts him in good company as 98% of the CAPS community rating the travel agency believe it will outperform the broad market averages. But you can travel to the Universal Travel Group CAPS page and tell us whether this is a stock investors should list as a destination spot.

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

Harris & Harris Group is a Motley Fool Rule Breakers recommendation. priceline.com is a Motley Fool Stock Advisor selection. Ctrip.com International is a Motley Fool Hidden Gems pick. Try any of our Foolish newsletter services today, free for 30 days.

Fool contributor Rich Duprey does not have a financial position in any of the stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.


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