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 able to stay ahead 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 33 stocks when I ran it and included these recent winners:
|
Stock
|
CAPS Rating
9/14/08
|
CAPS Rating
12/14/08
|
Trailing
13-week Performance
|
|
Cray (Nasdaq: CRAY )
|
**
|
***
|
36.8%
|
|
NOVA Chemicals (NYSE: NCX )
|
**
|
***
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13.7%
|
|
Echelon (Nasdaq: ELON )
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**
|
***
|
5.2%
|
Source: Motley Fool CAPS Screener; trailing performance from Dec. 12 to March 13.
NOVA Chemicals, in fact, was previously picked as a stock ready to run back in January, and with a buyout offer for its shares in place, it has lived up to that promise so far. So while this screen might tell us which stocks we should have looked at three months ago, what we want are the stocks that we ought to be looking at today. I went back to the screener and looked for stocks that were just bumped up to three stars or better, sporting valuations lower than the market's average, with price that haven't moved up over the past month by more than 10%.
Here are three stocks out of the 47 the screen returned that are still attractively priced, but which investors think are ready to run today!
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Stock
|
CAPS Rating
12/14/08
|
CAPS Rating
3/14/09
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Trailing
4-Week Performance
|
PE Ratio
|
|
Host Hotels & Resorts (NYSE: HST )
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**
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***
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6.2%
|
6.1
|
|
Sapient (Nasdaq: SAPE )
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**
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***
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2.1%
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8.3
|
|
United Stationers (Nasdaq: USTR )
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**
|
***
|
(31.1%)
|
5.1
|
Source: Motley Fool CAPS Screener; price return from Feb. 13 to March 13.
Though the results you get may be different, since the data is dynamically updated in real time, you can run your own version of this screen. But let's take a look at why investors might think these companies will go on to beat the market.
Host Hotels & Resorts
Back in November, CAPS member BrodieMan720 gave Host Hotels & Resorts the thumbs-down, although he did think it looked "less risky" than other companies in the space.
Less risky (based on beta) than sector, so the dividend yield is lower. They have less debt than the sector, and their long-term debt to equity looks better, but their growth rates aren't great. Consistent revenue growth, but I don't think it's enough to return better than the S&P. The only thing it seems they have going for them is (somewhat?) smart management in that they're capitalized a little better than the sector. They'll come out of this mess alright, but it's mainly for the yield that I'm watching it.
Sapient
Satyam Computer Services' (NYSE: SAY ) messy accounting scandal is reminiscent of the tangled situation in which business software and service provider Sapient found itself a few years ago, but CAPS All-Star member FoolSolo believes Sapient is a very different company today.
Financially and fundamentally attractive business. Low [price-to-book ratio], with great ROE > 22%, no debt and still growing sales and earnings. Mr. Market has thrown the baby out with the bathwater.
United Stationers
Fear that United Stationers would be shredded by Staples came to naught as the office-supply leader renewed its ties with the business-products distributor. CAPS All-Star becon800 finds United at a great price to buy into: "The last six earnings releases have been above expectations-great price - BUY."
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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