There are plenty of strategies for picking stock winners, from finding low P/E stocks to digging up companies selling at a discount to their future cash flows. At the small-cap stock-picking service Motley Fool Hidden Gems, the analysts are beating the market by 10 percentage points -- even in this market! -- by finding undervalued stocks that the market and investors have ignored.
But what if we could find a way to whittle down our list of prospects beforehand, to isolate those whose engines are just getting warmed up?
Using our investor-intelligence database, Motley Fool CAPS, I screened for stocks that were marked up by investors before their stocks began to rise over the past three months, even as the market headed south in a dramatic fashion. That underscores the research suggesting that CAPS' highest-rated stocks performed best, while its lowest-rated companies fared worst.
My screen returned just 6 stocks when I ran it, which suggests how difficult a time it's been, and included these recent winners:
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Stock
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CAPS Rating 5/13/08
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CAPS Rating 8/13/08
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Trailing 13-week Performance
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Indevus Pharmaceuticals
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**
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*****
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17.8%
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People's United Financial (Nasdaq: PBCT )
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**
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***
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6.5%
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Tompkins Financial (NYSE: TMP )
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**
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*****
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8.2%
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Source: Motley Fool CAPS Screener; trailing performance from Aug. 15 to Nov. 13.
While that tells us which stocks we perhaps should have looked at three months ago, we really want to find the stocks that we ought to be looking at today. So I went back to the screener and looked for stocks that just bumped up to three stars or better, sport valuations lower than the market's average, and whose price hasn't moved up over the past month by more than 10%.
These three securities (out of the 45 the screen returned) are still attractively priced, but investors think they're ready to run today!
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Stock
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CAPS Rating 8/13/08
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CAPS Rating 11/13/08
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Trailing 4-Week Performance
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P/E Ratio
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Goodyear (NYSE: GT )
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**
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***
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(46.9%)
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5.0
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International Speedway (Nasdaq: ISCA )
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**
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***
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2.2%
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11.1
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Bank of Hawaii (NYSE: BOH )
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**
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***
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(5.6%)
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11.6
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Source: Motley Fool CAPS Screener; price return from Oct. 17 to Nov. 13.
Let's see why investors might believe in these stocks' market-beating potential.
Goodyear
Although results haven't exactly run flat, tire maker Goodyear has seen its stock suffer a blowout as General Motors (NYSE: GM ) , Ford (NYSE: F ) , and Chrysler fishtail toward the abyss. CAPS member Sociologist described the slowing economy's impact on the company:
Cars are not selling, and thus, there are less tires, belt, and rubber parts to them being sold. People in tight situations will ride their tires another thousand miles, and put off that belt change. Additionally, there will be no bailout money for tire companies, they'll have to weather the storm on their own.
International Speedway
Jam-packed crowds were common at NASCAR events in recent years, but both International Speedway and Speedway Motorsports have reported falling attendance as the economy worsens. Additional factors like NASCAR competitors led CAPS member RA64 to suspect in July that International Speedway would post lower results:
The unified indy car series is picking up momentum and getting more mainstream media coverage. This may eventually cut into NASCARs coverage, and indy car may even take some of nascars sponsors in a few years. although the indycar series currently races at 5 ISC tracks, ISCs relationship with the IRL has been poor (due to ISCs close relationship it NASCAR, and the IRL is a competitor to NASCAR); indycar previously raced in as many 8 ISC tracks and the number will probably drop to 4 next year and maybe further.
Bank of Hawaii
If you read the headlines these days, you'd be forgiven thinking that most banks are tottering on the precipice of solvency. Bank of Hawaii seems to have avoided much of the meltdown, reporting earnings that grew 3% year over year. CAPS member postbusters gives it the thumbs-up, on the assumption that what doesn't kill you makes you stronger:
Everybody hates banks. I even hate banks. BOH is really a doughnut shop (heavy on the dough). Hawaii has avoided the meltdown thus far. BOH didn't die so it must be getting stronger (so I'm either Niche or just Itchy - we'll find out).
Three for free
It pays to start your own research on these stocks on Motley Fool 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. Head over to the completely free CAPS service, and let us hear what you've got to say about these or any other stocks that might be starting to rev their engines.
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