7 Highly Rated Stocks on Sale

I'm 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. He pays you house calls on a daily basis, offering 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, offering you premium prices for your holdings. At other times, he'll be inconsolably depressed about the future, offering 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 received a top five-star rating from our community of investors just 30 days ago:

Data from Motley Fool CAPS as of Feb. 16.

As the table shows, most of 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 Motley Fool Stock Advisor pick Unit.

Why so blue?
Few things can pummel a stock price like a disappointing earnings report.

For the fourth quarter, Unit reported earnings per share of $0.60, versus analyst expectations of $0.72. As a "thank you" for the sizeable miss, investors knocked shares down more than 7% after the report.

Of course, I'm not exactly sure what investors expected. The miss was fairly significant, but unless shareholders expected a miracle, Unit's results would inevitably fare poorly. For a company whose three business units -- contract drilling, oil and gas production, and gas gathering and processing -- depend on the health and pricing in the energy markets, there was simply nowhere to hide in 2009.

We shouldn't be surprised by the market's reaction. Much of "investing" these days seems to boil down to an unhealthy obsession with pennies on the upside or downside of each quarterly earnings announcement. That obsession lets investors easily miss things like Unit's debt reduction during the quarter (which brought long-term debt down to a mere $30 million), the improving operating environment, or the easy year-over-year comparisons that the company will face heading into 2010.

What the bulls say
There's no shortage of positive sentiment for Unit on CAPS. Nearly 1,500 CAPS members have rated the stock an outperformer versus just 15 that think the stock will lag the rest of the market. Much of the optimism comes either from a long-term bullish stance on energy -- natural gas in particular -- or the stock's relatively low valuation.

For CAPS All-Star bigsmitty52, a very timely outperform call in March of last year was based on the idea that a pickup in energy prices would jump-start the company:

As the economy shakes out, this stock will be a winner. With more than half of its rigs sitting idle, any pick up in oil prices will increase will increase the use of these rigs.

So far, that call has beaten the S&P benchmark by nearly 62 points, thanks in large part to Unit's bottom line shifting from a deep red back to black.

But is there more ahead? While energy prices have been frighteningly volatile over the past few years, it seems unlikely to this Fool that we're in for another dip like we saw in early 2009. This doesn't necessarily mean that Unit will be partying like it's 1999, but at least it should allow the company to continue to regain its footing and get some drills back into service.

But here's the important question: do you think the recent drop has created a good buying opportunity? Or will Unit's stock continue to struggle? Let the community know what you think -- head over to CAPS and share your thoughts with the other 150,000 members currently part of the community. Even if you'd prefer to pass on Unit, you can check out a couple of the other stocks listed above or any of the 5,300 stocks that are rated on CAPS.

It could be high time to buy some of the beaten-down stocks listed above, but how do you know when to sell?