3 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, whose 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 May 24.

As the table shows, these stocks are still very well-regarded by the CAPS community despite their underperformance over the past month. While these are not formal recommendations, let's take a closer look at whether opportunity could be staring us in the face.

CapitalSource
There hasn't been a whole lot of news for CapitalSource since the company badly missed analyst expectations in its first-quarter results earlier this month. Investors should probably be used to that; the company has missed expectations in each of the past four quarters. Still, the miss likely helped accelerate the stock's fall as the rest of the market began selling off.

Normally, I don't like to go against CAPS ratings, but I can't say that I'm terribly keen on CapitalSource, even though the community gives it four out of five stars. As I recently pointed out, the valuation may be compelling, and you could make a case for the company based on an improving economy, but the gnarly current financials may be a little much to stomach.

If that's not enough for you, consider that management doesn't seem to know what it wants to do with this not-so-mighty morphin' financial company. When CapitalSource came public back in 2003, the company's primary business was providing debt financing to companies already financed by private equity firms. Then, in 2005, the company decided that it'd rather be a real estate investment trust (REIT) focused on real estate lending, and bought armfuls of mortgage-backed securities to speed its "evolution."

When everything started to fall apart during the financial crisis, CapitalSource changed plans once again, this time buying a bank and deciding that it would no longer be a REIT.

This saga makes me think about Coke, and not because it makes me thirsty. What I truly appreciate about a blue-chip company like Coca-Cola is that it knows what it does well, and relies on that year-in and year-out. Sure, Coke has ventured outside of its font of cola with brands like Full Throttle energy drink and vitaminwater, but the core of what makes Coke great has always stayed pretty much the same.

On the other hand, companies that can't seem to decide on a core competency probably don't have one.

Manitowoc
As the global markets decline amid worries of renewed economic turmoil, it shouldn't be too surprising to see a cyclical company like Manitowoc take it on the chin. One side of Manitowoc's business sells cranes and competes with the likes of Terex (NYSE: TEX), while the other side sells food-service equipment and competes with companies like Middleby (Nasdaq: MIDD).

The cranes account for roughly 60% of Manitowoc's sales, while the food-service gear makes up the balance. The food-service segment gives Manitowoc a bit of a cushion, unlike a company such as Caterpillar (NYSE: CAT), which is completely reliant on the demand for heavy equipment.

While the food-service industry was far from untouched by the recession, the benefit of that segment showed through this past quarter for Manitowoc: Crane sales plunged 45% year over year, while food-service equipment sales actually crept up slightly.

Though the stock's 2010 price-to-earnings ratio of 52 might make it sound pretty pricey, analysts currently expect Manitowoc to bounce back in a big way over the next couple of years and deliver $1.55 per share by 2012. With a stable of strong brands and a manageable balance sheet, Manitowoc may prove CAPS' five-star rating correct.

National Oilwell Varco
Back in December, CAPS member Niksurfs gave NOV a thumbs-up and had this to say:

I have been a fan of ... [National Oilwell] for a long time. Through some of the acquisitions and because of the stellar management, this company has only continued to get stronger and proven itself to be more valuable. They have a patent list that makes them a technology leader in the CL/NG patch, their market pentration and segment domination is without question.

That, of course, was before the massive Gulf of Mexico oil rig disaster. A lot of National Oilwell's future will now depend on what happens on the other side of the Gulf mess, but that doesn't necessarily mean we're talking about different shades of bad. In fact, in light of the Gulf calamity, drillers and oil companies may be required to buy even more equipment from suppliers like National Oilwell.

Even if that doesn't happen, though, it seems highly unlikely that there will be a major global pullback in drilling as we're a long, long way away from eradicating the need for oil. With a trailing price-to-earnings ratio of less than 11, National Oilwell may live up to the five stars that CAPS members have bestowed on it.

I've given two of these stocks a thumbs-up in my CAPS portfolio. But here's the important question: What do you think? Head over to CAPS and share your thoughts with the other 165,000-plus members.

Does the phrase "wildly mispriced stock" make your mouth water? If so, Fool Anand Chokkavelu may have something to quench your investment thirst.