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 able to stay ahead -- even in 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 beforehand, finding 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 move up over the past three months in a market that has headed south in a dramatic fashion. My screen returned 86 stocks when I ran it and included these recent winners:
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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
13-Week Performance
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|
New Gold (NYSE: NGD )
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**
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***
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110.6%
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|
Northern Trust (Nasdaq: NTRS )
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**
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***
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33.6%
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|
Seabridge Gold (NYSE: SA )
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**
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***
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57.8%
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Source: Motley Fool CAPS Screener; trailing performance from Nov. 14 to Feb. 12.
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 were 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%.
Here are three stocks out of the 43 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, 11/12/08
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CAPS Rating, 2/12/09
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Trailing
4-Week Performance
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P/E Ratio
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American Commercial Lines (Nasdaq: ACLI )
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**
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***
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(4.5%)
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4.7
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Copa Holdings (NYSE: CPA )
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**
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***
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2.3%
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10.3
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Innospec (Nasdaq: IOSP )
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**
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*****
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(14.7%)
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6.1
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Source: Motley Fool CAPS Screener; price return from Jan.16 to Feb. 12.
Though the results you get may be different, since the data is dynamically updated, 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.
American Commercial Lines
While you might fancy that American Commercial Lines dates back to a time when paddlewheels and steamships traversed the Mississippi River, it actually plies those waterways transporting dry and liquid cargo via barge. CAPS All-Star jinchoice quotes its 10-Q to indicate how undervalued he finds the stock:
This is an excerpt from the 2008 third quarter 10-Q "We have received a preliminary independent appraisal of our fleet in connection with our intention to refinance the current credit facility. The value of ACL’s fleet reflected in the preliminary independent appraisal as of August 15, 2008 was in excess of $1 billion." Their total liability including all debt? $659 million. Also, the company is profitable. Current market cap? $189 million. I rest my case.
Copa Holdings
Flying out of Panama City, Copa Holdings provides passenger and cargo services to North, Central, and South America, as well as the Caribbean. Unlike its U.S. counterparts -- for example, Delta Air Lines (NYSE: DAL ) -- Copa offers cheap valuations, according to CAPS All-Star aj350 in this pitch from late last month:
i dont like the airline industry but if there's one gambling on its the one trading at about a 9x earnings, less than 7.5x [operating cash flow], and operating out of emerging markets that have growth potential and not with extra capacity like the US and Europe.
Innospec
Many specialty chemical companies have found business difficult in the current economic climate. United Kingdom-based Innospec, a fuel additives maker, is no different. However, Innospec was able to secure a round of financing valued at $150 million that lets it restructure its existing debt and provides working capital.
As the revenues from its anti-knock fuel additive have continued to decline, Innospec has branched out to other products that enhance fuel efficiency, which might be useful if gas prices start climbing again.
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 that you think are starting to rev their engines?
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