3 highly rated stocks at half-price

Even great stocks can fall to bargain-basement prices.

By Caps Editor Apr 15, 2010 5:53PM

This post comes from The Motley Fool's Rich Duprey.


You love buying your shirts when they go on sale. And who can resist a buy-one-get-one-free offer? So when our stocks go on sale, why do we bemoan their low prices?


Smart investors like Warren Buffett and Marty Whitman are delighted when companies they like are selling at bargain-basement prices. For them, these stocks become no-brainer buys.

The investors in the MSN CAPS community also like a bargain. Below, you'll find three companies whose shares earlier this week were selling at least 50% below their 52-week highs but which retained favorable four-star ratings. Consider it a buy-one-get-one-free sale on stocks.


A-Power Energy Generation Systems (APWR) designs and builds wind turbines and alternative energy systems used to supply electricity and heat to factories and rural towns. The Shenyang, China, company's American depositary receipts hit a 52-week high of $21.04 on Dec. 22. They closed at $10.62 on Thursday.


GMX Resources (GMXR) explores for and develops oil and natural gas deposits in Texas, Louisiana and New Mexico. Shares in the Oklahoma City company hit a 52-week high of $19.10 on June 1. They closed at $9.46 on Thursday.


Lexicon Pharmaceuticals (LXRX) is a biotech company focused on discovery and development of drugs for treatment in cardiology, immunology, ophthalmology and other areas. Shares in the Texas company reached a 52-week high of $3.78 on Sept. 15. They closed at $1.53 on Thursday.

Naturally, we want you to look closer at these stocks before buying. You can get low-priced appliances in the dent-and-ding section of your home-remodeling superstore, but their quality might not be so good. Same thing here: Make sure there's nothing seriously wrong with the company before you plug it into your portfolio.


Wait and see

Analysts and investors have had a tough time getting a reliable read on A-Power Energy, which recently provided 2010 sales guidance of $380 million, far below the $543 million Wall Street was expecting.

A-Power Energy's possible participation in a joint-venture project with General Electric (GE) and others to develop a wind farm in West Texas should make it easier for investors to accurately analyze the company's prospects. But a backlash is building over whether "Buy American" rules should preclude A-Power's participation in the renewable-energy project, which is being backed by the U.S. government.


Of course, that doesn't stop investors from trying. CAPS member "alabama4606" appropriately takes a long-term view when trying to assign a value to A-Power Energy.


"On the bright side they have important partnerships in place with GE and German (wind turbine maker) Fuhrlander, and plenty of lucrative contracts in place," alabama4606 wrote. "The question is, can they deliver? If they can, this stock will soar higher and higher over the next 5 years."


Demand catching up

Not only are we awash in a sea of natural gas, were also drowning in a morass of drilling rigs, according to Baker Hughes (BHI), one of the exploration-and-development companies continuing to deploy rigs despite the supply glut. So it's little wonder that analysts in recent days have marked down natural gas companies like GMX Resources and PetroQuest Energy (PQ). 


With President Barack Obama channeling his inner wildcatter, announcing plans to open new offshore areas for oil and natural-gas leasing, investors like CAPS member "gjg7777" are hoping that the president will get behind the proposed Natural Gas Act being touted by energy investor T. Boone Pickens, who advocates increased use of natural gas as a transportation fuel.


Pickens' company, Clean Energy Fuels (CLNE), is the largest provider of natural gas for transportation in North America.


With 95% of CAPS members rating GMX Resources to outperform the broader market, it seems that quite a few people agree with gjg7777. But the prospects for higher natural-gas prices don't seem encouraging, so I'm going to head over to the company's CAPS page and mark the company to underperform the broad averages.


More good news on the way?

Lexicon Pharmaceuticals has offered positive results in two midstage trials -- one testing a therapy's efficacy in treating irritable bowel syndrome and one on an experimental drug to treat diabetes. But the market didn't like the company's decision to raise $165 million via a share offering that will nearly double the share count.


CAPS All-Star "zzlangerhans," who closely follows the biotech sector, says that while Lexicon's share price reflects investor unhappiness over the dilution, the financing will keep the company solvent for at least another year, and there are positive developments on the horizon.


"While the next trial of (diabetes treatment) LX4211 hasn't yet been initiated, the most likely source of an upward gap this year is phase II data for arthritis compound LX2931," zzlangerhans wrote.


Have half a mind

It pays to start your own research on these stocks on MSN CAPS. Read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made -- all from a stock's CAPS page. Sign up today for the completely free service and tell us whether these stocks are twice as good at half the price.


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