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 service Motley Fool Hidden Gems, analysts are able to stay ahead of the market -- even this market! -- by finding undervalued stocks that the market and investors have ignored.
Yet what if we could find a way to whittle down our list of prospects before the market discovers them, finding those whose engines are just getting warmed up?
Using the investor-intelligence database Motley Fool CAPS, I screened for stocks that were marked up by investors before their prices began to move up over the past three months, in a market that has headed south in a dramatic fashion. My screen returned 54 stocks when I ran it, and included these recent winners:
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Stock
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CAPS Rating, 07/28/08
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CAPS Rating, 10/28/08
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Trailing 13-week Performance
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La Jolla Pharmaceutical (Nasdaq: LJPC )
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**
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***
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145.7%
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Rambus (Nasdaq: RMBS )
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**
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***
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2.2%
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Symantec (Nasdaq: SYMC )
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**
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***
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16.3%
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Source: Motley Fool CAPS screener. Trailing performance from Oct. 31 to Jan. 28.
While that tells us which stocks we perhaps should have looked at three months ago, what we want are the stocks that we ought to be looking at today. So I went back to the screener and looked for stocks that had just been bumped up to three stars or better, with valuations lower than the market's average and prices that hadn’t moved up over the past month by more than 10%.
Here are three stocks out of the 57 the screen returned that are still attractively priced, but that investors think are ready to run today!
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Stock
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CAPS Rating, 10/28/08
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CAPS Rating, 01/28/09
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Trailing 4-Week Performance
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P/E Ratio
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Lincoln National (NYSE: LNC )
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**
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***
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3.5%
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8.0
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Swift Energy (NYSE: SFY )
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**
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***
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(10.6%)
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4.8
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Wyndham Worldwide (NYSE: WYN )
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**
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***
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(6.1%)
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3.3
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Source: Motley Fool CAPS screener. Price return from Jan. 2 to Jan. 28.
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. But let's take a look at why investors might think these companies will go on to beat the market.
Lincoln National
Investing in a financial stock is no picnic these days, even if the Fed and Treasury are unloading their bazookas, tanks, and other implements of firepower to prop them up. For that reason, CAPS member bigpeach is filled with trepidation over an investment in Lincoln National:
If [Lincoln] is able to get through this relatively unscathed, money could be made here, but at this price it is simply too risky. If you buy this, expect 4th quarter results to be horrific and the dividend to be eliminated in the next year. This company should have raised capital when it was trading at $60. It may now be too late. I believe there is a substantial possibility of shareholders being wiped out.
Swift Energy
Earlier this month, it was reported that legendary value investor John Neff had set his sights on two oil plays, ConocoPhillips (NYSE: COP ) and Swift Energy. CAPS All-Star UltraContrarian would agree with Neff that Swift may swiftly acquire star power:
In my opinion this is the cheapest, least loved junior oil company:...
Consistently huge cash flow over the last few years. Oil is cheap now but they made a lot of money when oil was cheap. The fundamentals of the company and the market price are way out of line.
Wyndham Worldwide
CAPS member getrichdietrying says that the price of hotel chain Wyndham Worldwide is low enough:
The s&P droped 30% and the market in this sector droped from 30-80% ! bottomed out.seing increase in stock value for the hotel industry compared to dec 08 value!
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 you think are starting to rev their engines.
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