Editor's note: A previous version of this article failed to mention that Hospitality Properties Trust eliminated its dividend earlier this month. The Fool regrets the error.
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 have stayed ahead of the 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 103 stocks when I ran it and included these recent winners:
|
Stock
|
CAPS Rating
10/21/08
|
CAPS Rating
1/21/09
|
Trailing 13-Week
Performance
|
|
Goodyear (NYSE: GT )
|
**
|
***
|
39.3%
|
|
Huntsman (NYSE: HUN )
|
**
|
****
|
45.9%
|
|
Micron Technology (NYSE: MU )
|
**
|
***
|
28.9%
|
Source: Motley Fool CAPS Screener; trailing performance from Jan. 23 to April 20.
Goodyear, in fact, was previously picked as a stock ready to run last November and has put the rubber to the roadway 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, and whose price hasn't moved up over the past month by more than 10%.
Here are three stocks out of the 38 the screen returned that are still attractively priced but which investors think are ready to run today!
|
Stock
|
CAPS Rating
1/21/09
|
CAPS Rating
4/20/09
|
Trailing 4-Week
Performance
|
P/E Ratio
|
|
Hospitality Properties Trust (NYSE: HPT )
|
**
|
***
|
(21.4%)
|
8.4
|
|
Psychiatric Solutions (Nasdaq: PSYS )
|
**
|
***
|
(13.4%)
|
7.5
|
|
Energizer Holdings (NYSE: ENR )
|
**
|
***
|
4.2%
|
9.4
|
Source: Motley Fool CAPS Screener; price return from March 27 to April 20.
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.
Hospitality Properties Trust
Back in February, CAPS member adavisclan found Hospitality Properties Trust to be one of the strongest REITs in the business, even though the company has eliminated its dividend since that pitch was made.
Solid balance sheet, one of the strongest in [its] industry, should allow HPT to ride out the slump in TA and in reduced room occupancy. Dividends are extremely attractive. Even if dividend where cut by 50% would still be a solid paying company with the resources to back up their dividend.
P/Ex of 9.0 is lower than REIT industry average. Conservative management, while limiting upside, is a god send in the current environment. With 20/20 hindsight, acquisition and price paid for TA [is] questionable. Nevertheless, should be able to overcome this.
Psychiatric Solutions
While debt levels at Psychiatric Solutions are a concern for CAPS member coaster911, he's not going to be putting himself in a rubber room because of it. He sees lots of room for growth here.
The recently expanded SCHIP will benefit PSYS. PSYS hospitals are spread across the country and not concentrated in one area. PSYS has been able to push through price hikes due to dominate market share in the areas they serve. Unlike not for profit hospitals, if you can't pay or do not have insurance you don't get admitted to their facilities so they have very few patients that don't pay their bill. Favorable industry trends and diverse payor mix. Dominate player being the largest operator of free standing psychiatric facilities with over 10,000 beds in 31 stares. Same facility revenue growth in high single digits along with increasing EBITDA margins makes this a buy.
Energizer Holdings
Maybe it's the Energizer bunny banging his drum that's powering Energizer Holdings, but even with tough competition from Duracell-maker Procter & Gamble (NYSE: PG ) confronting it, investors like CAPS member edejeu believe it offers consumers a good deal. "They own Playtex products! A relatively cheap and fair priced goods."
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.
RSS Headlines
Fool UK