7 Highly Rated Stocks on Sale

As the market continues its charge through earnings season, it's hardly leaving investors wanting for action. It's kind of like that six-pack of Coke you dropped because you tried to balance it on top of the pizza box: The cans can be opened successfully, but one wrong move and you've got cola all over you. With many market participants very focused on quarterly results, one quarterly slip -- even if that just means 28% growth instead of 30% -- and your stock is getting red ticker tape all over it. What's a long-term investor to do?

In The Intelligent Investor, Benjamin Graham introduces readers to a charming but manic-depressive fellow who goes by the name "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. Due to Mr. Market's bipolar affliction, he will sometimes show up at your door incredibly excited about the prospects for the future and will want a sky-high price for his business interests, and will similarly offer you premium prices for your interests. On the other hand, he will occasionally become inconsolably depressed about what the future may hold and will offer to sell you his wares at discount prices, sometimes as low as pennies on the dollar.

As investors, our task is to figure out what the stocks are really worth. Then we can buy from Mr. Market when he offers low prices, sell to him when he gets too excited, and in every other case, just hang on to our stocks and ignore him completely. Once again, I've turned to The Motley Fool's CAPS community and picked out seven stocks that were rated with five stars by CAPS members, but whose price has been cut over the last 30 days. Are these examples of Mr. Market getting too depressed, or are they not top-quality merchandise after all?

So here are the week's five-stars on sale, as identified by your fellow Fools on CAPS. Each of the companies below had been given a five-star rating (the highest) by our community of investors just 30 days ago:

Vimicro snaps on and off
The nice thing about being a high-growth company based out of China and working in the fabless semiconductor industry is that when business is good, investors tend to get giddy. In the case of Vimicro, that meant the stock doubled in just three months at the beginning of 2006. As with some of the other tech stocks, its recovery from the dip last summer has been tough. It's been that much tougher for Vimicro because it can't seem to hit its quarterly numbers. After beating numbers in December of 2005, the company has missed analysts' expectations for three straight quarters -- the last two by 50% or more.

It's probably no surprise, then, that the stock fell 14% when the company guided below analysts' estimates for the first quarter of 2007. The company cited the impact of the Chinese New Year holiday and the late launch of Windows Vista as reasons for the soft expectations, but also said that now that Vista is on the market, it should help bring future results back around. CAPS player Kirkydu2007 believes that Vimicro has "strong technology in mixed signal chips and high access to [the] China market. It is likely to have some hiccups in 2007 to offer patient investors buying opportunities." Could this be one of those hiccups?

Who you callin' a Hurray beast?
If you had been with me last week, you would've read about Kongzhong, a stock that, as of last week, was down 18% in one month despite being a five-star pick in CAPS and the pick for the best small cap of 2007. As with Kongzhong, there's no clear-cut reason for Hurray! to be down this much over the past month.

The whole throng of China-based mobile phone value-added service providers had a tough year in 2006 because of some policy changes at China Mobile, the Chinese cell-phone giant. The changes required tighter control on how the service providers sign up clients, and was expected to lead to a big drop-off in subscribers for the providers concerned. The stocks managed to recover in the second half of last year, only to run into more pessimism early this year.

In CAPS, WetCoast shares that "Hurray! is a more concentrated version of Kongzhong, with a long-term strategic focus to become both a content producer and provider. In the past year, the company has bought either controlling or significant stake in three music labels and one mobile game company. With the rights to sell music-based WVAS services such as ringtones based on the content they now own, the company is taking more control of its future." With more than $3 per share of cash on the books, this $5 stock may well be an inexpensive way to invest in high-growth China.

So are you with the rest of the CAPS crew or against them? Either way, you can let them know by simply logging on to CAPS. In addition to the seven picks mentioned here, there are more than 3,700 other stocks rated on CAPS and more than 21,000 investors participating in making it a powerful tool for stock research.

For more CAPS coverage:

• The Best Tech Stock for 2007 Is ...
• This Just In: Upgrades & Downgrades
• The Market's Big Movers

Not on CAPS yet? Fool contributor Matt Koppenheffer says, "I pity the fool that ain't on CAPS." He does not own shares of any of the companies mentioned. The Fool's disclosure policy is tougher than BA Baracus himself.