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 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. 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.

So 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 April 15.

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 AZZ.

Why so blue?
AZZ's fourth-quarter earnings numbers, announced early this month, are to blame for the recent weakness in the company's stock. On April 4, the company summarily pulled up to the earnings dinner table and let out a giant belch -- or at least that's the way the market took it.

Year over year, AZZ managed to boost profit 5% for the quarter and top Wall Street's expectations, but revenue also fell 4% from the year-ago fourth quarter and backlog was down more than 8% from the 2007 third quarter. The company said that the soft backlog was because of the timing of orders, not a change in the market, but that did little to placate investors, who sent shares down 15% the day of the announcement.

What the bulls say
Though AZZ is just a $350 million industrial company, nearly 400 CAPS investors have identified the stock as a good opportunity. Last August, Back2BeBad2 gave AZZ a thumbs-up:

This company is both a good short term and long term buy. It is in the sweet spot of the infrastructure build (power transmission and distribution and galvanized products) that is required and will be required in America and overseas. Think of the coming need for electricity and new roads and bridges that will be needed. As of its last quarter results it had an income growth rate of 41%, expanding margins, increased backlog and upped guidance for the remainder of the year. All with a P/E of 17. I like the combination of it all.

Now, some things have changed since that pitch was written. For instance, it was the sudden decrease in the backlog in the last quarter of the year that freaked out so many investors. Of course, the stock's price has also made quite an adjustment, and shares are trading at a forward P/E closer to 11 now. Looking ahead, though, the electrical distribution and petroleum markets that have been good to the company don't seem ready to peter out quite yet, and AZZ is bullish enough on the galvanizing market that it bought the galvanizing operations of AAA Industries at the beginning of April.

So 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 96,000-plus players who are part of the community. Even if you'd prefer to pass on AZZ, you can check out a couple of the other stocks listed above or any of the 5,500 stocks that are rated on CAPS.

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