7 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:

Data from Motley Fool CAPS as of Dec. 1.

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 further research. I'll even get you started with some thoughts on Syneron Medical.

Why so blue?
Following the announced acquisition of Candela CLZR and a very bullish upgrade from an Oppenheimer analyst in September, Syneron's stock had a pretty sweet 30%-plus run. The party ended, however, when the stock ran into an earnings buzz saw.

While the company's management team tried to package the quarter as nicely as possible -- crowing about improved gross margins and $362,000 in operating cash flow -- if it looks like poo and smells like poo, it's probably poo.

Despite the gross margin improvement, the company remained solidly unprofitable, with a $0.20-per-share loss that was much worse than analysts had anticipated. While Syneron does have a very strong balance sheet with no debt and more than $200 million in cash and securities available for sale, it's questionable whether that will keep investors around during the losses that analysts expect through 2010.

One of Syneron's largest investors, Seth Klarman's Baupost Group, may already be losing faith. His fund cut its position in the stock by nearly a third during the third quarter.

What the bulls say
Though I happen to be skeptical about Syneron's prospects, the CAPS community has given the stock a bullish five-star rating. More than 850 CAPS members have weighed in, and 821 think it will outperform the rest of the market.

CAPS All-Star tenmiles has been a fan of the stock since late last year and gave a bullish assessment at the time:

Deep value play for a number of prominent investors has become an even deeper value after recent earnings miss. ... value metrics seem compelling - debt free, 60% of market cap in cash, small premium to book. Likely dead money for a while, but solid 3-5 year recovery prospects from current level.

But here's the important question: Do you think the recent drop has created a good buying opportunity? Or will Syneron continue to struggle? Head over to CAPS and share your thoughts with the 145,000 members currently part of the community. Even if you'd prefer to pass on Syneron, you can check out a couple of the other stocks listed above or any of the 5,300 stocks that are rated on CAPS.

Want to follow in the footsteps of an investing legend? I highlighted what Warren Buffett looks for when he's scouting for investments.