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TheStreet Open House

5 Quality Stocks Trading at a Discount

Stocks in this article: GNWCDXSANRMDASTEX

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

By David Sterman

NEW YORK ( StreetAuthority) -- Take your mind back to the third quarter of 2011. Companies were posting robust profits and investors were wading back into the market, helping to fuel a 15% gain in the S&P 500 from early October to the second week of November.

But the just-ended earnings season must seem like an ancient history now, and investors are once again hitting the "sell" button. Since peaking at 1278 on Nov. 8, the S&P 500 has already begun to cough up its gains and is now on its way to buckling back under the 1200 mark.

The sudden mood change must be especially hard to fathom for the companies that just delivered great third-quarter results, since several stocks posted double-digit gains on the day they released earnings. I took a closer look at the stocks that have given up most or all of their gains in subsequent sessions to see what their fundamentals look like for the upcoming quarters. It's important to keep in mind that the recent price drops these stocks have seen is not their fault. They're good companies stuck in a lousy market environment.

Here are the five companies I found.

1. Genworth Financial (GNW)

One-day gain: 17%

This insurer saw its shares jump by more than $1.00 on Nov. 4 to $7.19 after reporting earnings per share of 21 cents -- two cents ahead of the consensus forecast. Investors were also cheered by news that its Australian unit would conduct a value-unlocking initial public offering. A few weeks later, shares are right back at $6. The move to conduct an IPO for 40% of its Australian division led Citigroup to boost its rating from sell to neutral.

"The move could shore up GNW's balance sheet while simultaneously improving financial flexibility and providing a more ascertainable floor valuation for its shares," noted Citigroup, which has an $8 price target on the stock. This is the same price target used by Merrill Lynch, implying more than 35% upside from current levels.

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