Warren Buffett made billions buying undervalued companies before market sentiment swung back in their favor. Legendary sandalwood bandit and handlebar-mustache wearer extraordinaire Veerappan made his personal fortune by staying one step ahead of the law. And our Motley Fool Stock Advisor newsletter -- headed by Fool co-founder David Gardner -- is currently beating the market by 38 points with its recommendations of companies like Amazon.com (NASDAQ:AMZN), up 408% after a full recovery from the bursting of the tech bubble

With these examples in mind, I used our new CAPS screening tool to find the stocks poised for big gains -- before Wall Street catches on.

They have:

  • Trailing three-year earnings growth of at least 10%.
  • Market capitalizations of at least $200 million.
  • Four- or five-star ratings in CAPS, up from one, two, or three stars at the beginning of 2008.

Remember, since the launch of CAPS in 2006, five-star stocks like Chesapeake Energy (NYSE:CHK) (up 25% in the past year) outperformed all other categories, yielding 12% on average.

Company

Share Price

Sector

Market Cap

CarMax (NYSE:KMX)

$14.29

Services

$3.1 billion

DuPont (NYSE:DD)

$42.16

Basic Materials

$38 billion

Eli Lilly (NYSE:LLY)

$47.37

Health Care

$51.6 billion

Qualcomm (NASDAQ:QCOM)

$52.87

Technology

$86.7 billion

Under Armour (NYSE:UA)

$31.26

Consumer Goods

$1.5 billion

Data from Motley Fool CAPS and Yahoo! Finance as of Aug. 4.

Come and join us on Motley Fool CAPS to dig into these companies further. Let our 110,000-person-strong (and counting) CAPS community help you stay a step ahead.

Or, if you'd like to check out the official list of Stock Advisor recommendations that have been crushing the market (along with our rationale for each pick), you can click here for a free 30-day trial.

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