3 Stocks Ready to Roar

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, even in this market, the analysts are beating the market by 10 percentage points by finding undervalued stocks that both the market and investors have ignored.

Yet what if we could find a way to whittle down our list of prospects beforehand, uncovering 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, in a market that has headed south in a dramatic fashion. My premise underscores the research suggesting that CAPS' highest-rated stocks performed best, while its lowest-rated companies fared worst.

My screen returned just 41 stocks, including these recent winners:

Stock

CAPS Rating

07/01/08

CAPS Rating 10/01/08

Trailing 13-week Performance

CompuCredit (Nasdaq: CCRT  )

**

***

74.4%

Travelers (NYSE: TRV  )

**

***

16.5%

Puget Energy (NYSE: PSD  )

**

***

6.0%

Source: Motley Fool CAPS Screener; trailing performance from Oct. 3 to Dec. 31.

While that tells us which stocks we perhaps should have looked at three months ago, we really want the stocks that we ought to be looking at today. So I went back to the screener, in search of stocks that just bumped up to three stars or better, sport valuations lower than the market's average, and haven't increased in price by more than 10% over the past month.

Here are three stocks out of the 27 my second screen returned that are still attractively priced, but which investors think are ready to run today!

Stock

CAPS Rating 09/30/08

CAPS Rating 12/31/08

Trailing

4-Week Performance

P/E Ratio

AerCap (NYSE: AER  )

**

***

(2.3%)

1.2

Ameriprise Financial (NYSE: AMP  )

**

***

9.6%

9.3

NOVA Chemicals (NYSE: NCX  )

**

***

(16.3%)

1.4

Source: Motley Fool CAPS Screener; price return from Dec. 5 to Dec. 31.

Though the results you get may be different, since the data is dynamically updated in real time, you can run your own version of the screen. For now, let's take a look at why investors might think some of these companies will go on to beat the market.

AerCap
With CEOs like General Motors' (NYSE: GM  ) Rick Wagoner being forced to surrender their fleets of corporate aircraft in exchange for a government bailout, you'd think that now would be a bad time to be in the aircraft trading and leasing business. Yet CAPS All-Star TSIF thinks AerCap is always a victim of guilt by association:

Unfortunately for this company it's branded by "association" even when the associations don't make sense. It's leasing side makes money when airlines aren't buying. It's selling side makes money when they are. When fuels up airlines tank, but AerCap doesn't fly the planes, and better fuel efficiency on new planes makes them valuable. There is money in some places...when you can lease planes to Dubai you have the market breadth to fly high.

Ameriprise Financial
Only a few months ago, Ameriprise Financial was featured here as a company ready to roar. Though it's up almost 10% over the past month, CAPS member 9ballkid still finds it appealing: "Decent balance sheet nice cash on hand, low debt, 3+% dividend 18% percent projected increase in EPS next year seems i fly this one for a bit"

NOVA Chemicals
Junkyardhawg1985 is a CAPS All-Star who thinks specialty chemicals maker NOVA Chemicals is very cheap at these levels "Very cheap stock based on past performance. The trailing P/E is 1.3, it trades at less than 0.4X net tangible assets, growing revenue 19%, and an [enterprise value]/rev of 0.25."

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 share your opinions on these or any other stocks starting to rev their engines?

On Jan. 12, 2009, Fool co-founder David Gardner, Jeff Fischer, and their Motley Fool Pro team will accept new subscribers to their real-money portfolio service. Motley Fool Pro is investing $1 million of the Fool’s own money in long and short positions in a range of securities, including common stocks, put and call options, and exchange-traded funds (ETFs). They also incorporate proprietary CAPS "community intelligence" data into their research. To learn more about Motley Fool Pro, and to receive a private invitation to join, simply enter your email address in the box below.

Fool contributor Rich Duprey does not have a financial position in any of the stocks mentioned in this article. You can see his holdings. CompuCredit is a Motley Fool Stock Advisor pick. The Fool has a disclosure policy.


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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 January 09, 2009, at 1:42 PM, jmcityplanner wrote:

    FYI- Puget Energy is getting bought out for $30/share and should be closing in 1Q of 2009.

  • Report this Comment On February 23, 2009, at 4:07 PM, TMFCop wrote:

    International Petroleum Investment, a company owned by the Abu Dhabi government, announced it was buying NOVA Chemicals today for $6 a share.

    NCX was trading at $4.76 a share when this article ran, and fell as low as $1.10 earlier this month. The buyout price represents a 26% increase from when NCX appeared here.

    Rich

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