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 (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.

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 14.

Though the declines above may look like no big deal after the bloodletting we've seen over the past year, we shouldn't overlook the fact that the S&P 500 index jumped more than 10% over the past month. So not only did these stocks decline, but they also missed out on one of the best months for stocks in quite some time.

But 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 Cadbury.

Why so blue?
I can hear investors saying it now, "No Cadbury, it's not you, it's me. I'm just looking for something a little different now. Something a little more ... dangerous."

The market has been a scary place over the past couple of years and there's a good likelihood that many investors fled to the arms of "safe" companies like Coca-Cola (NYSE:KO), Procter & Gamble (NYSE:PG), and Cadbury. The expectation was that their stable, recession-resistant businesses would help their stocks outperform the rest of the market. And they were right -- over the past year the stocks of all three of those companies stayed ahead of the S&P 500.

But now investors may start to greedily eye the big returns coming from stocks that were considered toxic not all that long ago -- stocks like Bank of America (NYSE:BAC), which has soared 75% over the past month. That, of course, means leaving some of the trusty safe stocks by the side of the road.

What the bulls say
On CAPS, 252 members have provided a thumbs-up for Cadbury, versus just 19 that think it will underperform the market. Right around this time last year, CAPS member MsUsed chimed in to say:

Cadbury is ranked amonst the best in confectionary concoctions. With the recent changes made in the Wrigley's and Hershey's companies this one has laid low to avoid any sort of "political damage" to them as a comapny and as a name. The numbers all look appealing and promise a profitable future.

It's hard to argue against Cadbury as a long-term holding. The company owns a cartload of very recognizable brands, including Trident, Halls, Sour Patch Kids (a personal favorite), and of course Cadbury. While it doesn't have a knock-your-socks-off balance sheet, its debt level is reasonable and well-supported by its stable business. Plus, the sweets seller already has good roots set down all around the globe, so it's ready to tap into growing markets.

However, with stock deals abounding out there right now, I can't blame investors for looking for greener pastures. Based on current analyst estimates, the stock currently trades at over 15 times its expected 2009 profit. That's not overly high, but with high-quality stocks changing hands at single-digit earnings multiples, it's not attractive either. The company also has been cutting it close on the cash front over the past couple years, which makes me wonder if there's much room to continue to grow its dividend.

So do you think the recent drop has created a good buying opportunity? Or will investors continue to drop Cadbury for what's hot? Let the community know what you think -- head over to CAPS and share your thoughts with the other 130,000 members currently part of the community. Even if you'd prefer to pass on Cadbury, you can check out a couple of the other stocks listed above or any of the 5,300 stocks that are rated on CAPS.

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