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.

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 Oct. 7.

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 further research. I'll even get you started with some thoughts on St. Jude Medical.

Why so blue?
Considering that we're breaking into earnings season, it shouldn't be all that surprising that the nasty drop in St. Jude's share price came from recent disappointing earnings guidance.

The company came clean on Tuesday, saying that third-quarter adjusted earnings will clock in between $0.57 and $0.58 per share, down from the previous range of $0.61 to $0.63. Investors took an ax to shares after the announcement, sending them swooning nearly 13% on the day of the announcement.

St. Jude chalked up the shortfall to economic conditions and -- surprise, surprise -- health-care reform. Management said that these factors fed through to its customers and kept a lid on their purchases.

What the bulls say
St. Jude has been clawing its way up in the medical device industry and has seen its revenue and operating earnings increase 116% and 120%, respectively, over the past five years. And for those who still believe in the "baby boomer" investment thesis, it would seem that the company's cardiac rhythm management franchise could be well-positioned for the growing health-care bill of the country's aging population.

CAPS members certainly seem to see potential for St. Jude's stock, which carries a perfect five-star rating with 446 outperform ratings versus 14 underperforms.

CAPS All-Star coryjobe gave the stock a thumbs-up in May and noted the baby boomer theme: "The [cardiac rhythm management field] is becoming much more crowed as the baby boomers start to get older (I should look into who makes [D]epends) and St. Jude is well positioned to take advantage of this, also the Atrial Fibrillation and Neuromodulation ... offer significant long-term growth opportunities."

But here's the important question: Do you think the recent drop has created a good buying opportunity? Or will the economy and health-care reform continue to cramp St. Jude's style? Head over to CAPS and share your thoughts with the other 140,000 members. Even if you'd prefer to pass on St. Jude, you can check out a couple of the other stocks listed above or any of the 5,300 stocks that are rated on CAPS.