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There are plenty of strategies for picking stock winners: low P/E stocks, companies selling at a discount to their future cash flows, and more. At the small-cap stock-picking service Motley Fool Hidden Gems, the analysts are beating Wall Street -- even in this market! -- by finding undervalued stocks that investors have ignored.

Yet what if we could find a way to whittle down our list of prospects beforehand, filtering for those whose engines are just getting warmed up?

Using the investor-intelligence database of 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 hurry. Research suggests that CAPS' highest-rated stocks have performed best since we began collecting data, while its lowest-rated companies fared worst.

My screen returned just five stocks when I ran it, which suggests how difficult a time it's been. Still, the list included these recent winners:


CAPS Rating 05/20/08

CAPS Rating 08/20/08

Trailing-13-week Performance

Family Dollar




Velcro Industries (Nasdaq: VELC  )




Wavecom (Nasdaq: WVCM  )




Source: Motley Fool CAPS Screener; trailing performance from Aug. 22 to Nov. 21.

While that tells us which stocks we perhaps should have looked at three months ago, we want to know which stocks 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%.

Out of the 38 stocks the screen returned, here are three attractively priced companies that investors think are ready to run today:


CAPS Rating 8/20/08

CAPS Rating 11/20/08

Trailing-4-Week Performance

P/E Ratio

Bank of America (NYSE: BAC  )





MeadWestvaco (NYSE: MWV  )





Titan International (NYSE: TWI  )





Source: Motley Fool CAPS Screener; price return from Oct. 24 to Nov. 21.

Let's see why investors might think some of these companies will go on to beat the market.

Bank of America
Bank of America CEO Ken Lewis predicts that a number of midsized banks, roughly the size of National City (NYSE: NCC  ) , will ultimately disappear from the market. CAPS member bayareatrader figures that if any bank can survive this turmoil, it must be B of A:

It's not owned by the government, but the government acts like it is. I own some of this and am aware that it's going to take a beating for a while, but it has a big dividend, so the only thing you need to worry about is if it will survive. If it doesn't it's hard to imagine what will be left.

With packaging products composing half of MeadWestvaco's revenue, CAPS All-Star devoish likes its prospects:

Solid packaging growth in Asia and Brazil (where it is a substantial landowner) from recent acquisitions along with currency benefit is excellent, helping slower growth in North America, but at least it is still growth, which they atribute to a better mix of products, newer better products and the ability to increase price. Seems to be able to adapt its packaging styling succesfully to different markets, Eastern Europe, Brazil, Asia.

Titan International
While Goodyear (NYSE: GT  ) appeared here last week, the difference between it and Titan is that Titan makes big honkin' tires used for agricultural, construction, and industrial uses, not dainty treads for run-of-the-mill cars. CAPS All-Star TMFSmashy thinks demand for these uses will continue to grow: "Farm and mining tires remain in high demand. Expecting a big step change in earnings next year."

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. Why not head over to the completely free CAPS service and let us hear what you've got to say about these or any other stocks starting to rev their engines.

Bank of America is a Motley Fool Income Investor pick. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Rich Duprey owns shares of Goodyear, but he does not have a financial position in any of the other stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.

Read/Post Comments (1) | Recommend This Article (10)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On November 22, 2008, at 2:31 PM, SteveTheInvestor wrote:

    BayAreaTrader should not be so quick to point out BAC's dividend. It's been cut in half once and I won't be surprised when it gets cut again. Even with the recently reduced dividend, the payout ratio is in excess of 200%. How long will they keep that up?

    The market obviously has no faith in BAC. Even with the large rally on Friday, BAC jumped less than 2%. No vote of confidence there that I can see. Maybe if your time frame is at least 10 years, it is a good buy. I think the next few years are going to be dangerous.

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10/25/2016 4:00 PM
BAC $16.72 Down -0.05 -0.30%
Bank of America CAPS Rating: ****
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NCC.DL2 $1.81 Down +0.00 +0.00%
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TWI $10.42 Down -0.06 -0.57%
Titan Internationa… CAPS Rating: ****
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