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 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, 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 his daily wares 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 Nov. 17.

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 Hidden Gems recommendation W&T Offshore.

Why so blue?
W&T Offshore's third-quarter earnings report was better than analysts had expected. Excluding the impact of an unrealized loss from derivatives, the company broke even for the quarter, besting the $0.05-a-share loss that Wall Street expected.

So why would investors continue selling off the stock? A downgrade that came from a Jeffries analyst the day after earnings were announced certainly didn't help. Subash Chandra dropped the company's stock from "buy" to "hold," claiming that a double-digit decline in production and reserves could be ahead for 2010.

Investors may also be slightly wary of the company's financial position. Though the company's EBITDA-to-interest ratio remained very comfortable during the third quarter, its cash balance is notably down from last year, and it sports a 181% debt-to-equity ratio.

What the bulls say
Though Jeffries' Chandra may be skeptical about W&T, the average estimate among analysts for the company's 2010 earnings per share is currently $1.18, putting the stock's forward price-to-earnings ratio at less than 9. Investors can also hope that the company's conservative way of approaching the business and a huge amount of insider ownership means that management is making moves that will benefit shareholders over the long term.

On CAPS, 816 members of the community have given W&T's stock a thumbs-up, while 28 think it will lag the rest of the market. Many of the W&T fans are simply convinced that oil and natural gas will continue to play a major role in meeting the world's energy needs for a long time. Bubbasuth, for example, had this to say when rating the stock an outperformer back in May:

Energy will still be dominated by fossil fuels for decades, even with the move to alternative. High internal ownership indicates faith and resolve in the companies future.

But here's the important question: Do you think the recent drop has created a good buying opportunity? Or will W&T continue to struggle? Let the community know what you think -- head over to CAPS and share your thoughts with the other 140,000-plus members currently taking part in the community. Even if you'd prefer to pass on W&T, you can check out a couple of the other stocks listed above, or any of the 5,300 stocks currently rated on CAPS.