5 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. 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 has been given one of the two highest ratings from CAPS members:

Source: Motley Fool CAPS as of Sept. 29.

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, let's take a closer look at whether opportunity could be staring us in the face.

Why so blue?
There was a time a few years back when I thought Irish banks -- and Allied Irish in particular -- could be solid investments. The numbers looked good, and I believed in the Celtic Tiger. But guess what? I was wrong.

Today, the Irish financial system is on very shaky ground and that's largely thanks to grave concerns about the government-owned Anglo Irish Bank as well as private banks like Allied Irish and Bank of Ireland. What once looked like reasonable investments to me now look like pure speculation. And the big drop in the shares of both banks suggests that most investors don't have the stomach for such a gamble either.

It seems like it's just been one thing after another for Monsanto and shareholders couldn't be blamed for feeling beaten down. The most recent whack to shares came as the company's SmartStax product -- engineered corn seeds that were developed with Dow Chemical (NYSE: DOW) -- is reportedly not only not living up to its hype, it's not even showing better performance than Monsanto's older corn seeds. The disappointment has registered loud and clear in Monsanto's shares.

No matter where you stand on the U.S. economic recovery, it's just too far of a leap to try and argue that the housing and general construction sectors are in good shape. And for confirmation of that, you don't have to look further than the continued struggles of homebuilder KB Home (NYSE: KBH).

When you're Owens Corning and most of your sales come from building materials, this makes for a tough business environment. Just over a week ago, the company announced that demand for roofing shingles would fall 10% this year and that it would not hit the high end of its earnings target. And that's not the kind of announcement that shareholders like to hear.

Finally, nothing jumps out in particular as a major catalyst for Disney's stock's loss over the past month. Investors could be getting nervous about upcoming earnings season or they may simply be finding opportunities that they think are better than Disney's stock.

Picking a winner
Though the CAPS community has a high opinion on all of these stocks, I'm not necessarily on the same page across the board. I am, however, definitely on board when it comes to both Disney and Owens Corning.

Search the world over and it's hard to find a better brand than Disney. In fact, according to brand specialist Interbrand, you'll only find eight such brands as Disney moved up a spot last year to become Interbrand's ninth most valuable brand in the world. Though pressure on consumers creates a headwind for Mickey Mouse and company, the company has performed well through the downturn.

Of course, Disney's stock hasn't exactly flown under the radar, and I find it hard to call the stock's current price particularly cheap.

Owens Corning's results have not held up as well as Disney's during the slump, but that shouldn't be all that surprising considering the state of the construction sector. And while the company's bottom line over the past few years looks positively schizophrenic, a closer look at its results show that there has been definite improvement since the post-housing-bubble dive. The company's balance sheet is also in the best condition it's seen in many years. And in the midst of all of this, the company's stock is trading at less than book value and less than 11 times unlevered free cash flow.

CAPS member steelheart100 joined the Owens Corning bullish chorus back in August and said:

Balance sheet is in good shape, high cash flow, low debt, beat down industry. Seems a good bet for solid long term returns.

I've given both Disney and Owens Corning 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 170,000-plus members currently part of the community.

While the stocks above may still have brighter futures ahead, this red-flag-ridden company may not be so lucky.