5 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 five companies whose shares are selling at least 50% below their 52-week highs, but which still earn high honors from our investor-intelligence database. Consider it a BOGO sale on stocks.

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
Genetic testing device maker Sequenom has tested the limits of investor patience following the scandal surrounding its Down syndrome test. There remains potential in this firm, particularly if the SEQureDx data that was mishandled is ultimately validated, but investors are smart to view that possibility with a jaundiced eye.

The various legal and regulatory investigations in motion will ultimately get to the bottom of whether this is just poor procedures or outright fraud, but Sequenom's latest quarterly report highlights additional concerns.

Revenue fell as a result of fewer sales of its MassARRAY tests, though consumables and service contracts from prior placements rose. While that shows the potential the tests hold for future growth, provided the company can get its product out there, the current economic climate has led customers to significantly cut back their expenditures. 

Furthermore, Sequenom says it haven't secured enough funding to finance operating expenses and capex for next year, and the money it expects to have on hand by the end of the year won't be enough. If it maintains current levels of spending, it won't survive. Expect the company to take a meat axe to various line items.

This is a symptom of a company hunkering down for the worst. While it may be necessary, it does not bode well for growth or stock price appreciation, at least not in the near future. Add in the ongoing investigations, and investors are right to be leery here.

However, highly rated CAPS All-Star member mrindependent shares management's faith in the science behind the SEQureDX test:

Apparently Sequenom's reported success for non-invasive prenatal testing was based on improperly supervised studies. Now no one at the company is willing to guarantee success, but management is willing to say that they still believe in the science. The current Directors and Officers seem to be reputable experts in their fields and they do not seem to be con artists. Based on the people involved, the theoretical underpinings and on the promising (but suspect) data delivered so far, I believe that Sequenem has a better than even chance of eventually commercializing its tests (or or selling itself to a larger player). If the tests are indeed viable, this company will be worth billions compared to its current market cap of $200 million. In summary, I think reward outweighs risk in this highly speculative stock that is currently trading at 1.8 times book value (which is 85% off its all time high).

The company is trying to shore up investors' lack of confidence. Following the mass firings last month, management installed a CFO who has extensive experience at Ligand Pharmaceuticals (NASDAQ:LGND). Harry Hixson, the company's chairman and a former COO at Amgen (NASDAQ:AMGN), remains the interim CEO.

The stock is indeed cheap, and those who buy in now could reap substantial profits if positive news comes out. Yet there is also the very real possibility that this wasn't just a case of simple mishandling of data, but instead fraudulent manipulation. It's interesting to note that just before the scandal became public, Sequenom's vice president in charge of prenatal diagnostics sold off all of his shares, reaping a nice windfall.

It's too difficult to call right now, so a bet here wouldn't be an investment, but rather a gamble. Smart Fools should choose not to invest their money that way.

Have half a mind
It pays to start your own research on these stocks on Motley Fool CAPS. Read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made, all from a stock's CAPS page.

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