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, the analysts are able to outperform 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 companies whose engines are just getting warmed up?
Using the Motley Fool CAPS investor intelligence database, I screened for stocks that investors had marked up before their prices began to move up over the past three months. The screen returned 85 stocks when I ran it and included these recent winners:
|
Stock
|
CAPS Rating Nov. 11, 2008
|
CAPS Rating Feb. 11, 2009
|
Trailing
13-week Performance
|
|
American Commercial Lines (Nasdaq: ACLI )
|
**
|
***
|
11.5%
|
|
American International Group (NYSE: AIG )
|
**
|
***
|
93.3%
|
|
BreitBurn Energy Partners (Nasdaq: BBEP )
|
**
|
*****
|
10.7%
|
Source: Motley Fool CAPS Screener; trailing performance from Feb. 6 to May 8.
American Commercial Lines, in fact, was picked as a stock ready to run in February and is living up to its potential. 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 had just been bumped up to three stars or better in CAPS, sport valuations lower than the market's average, and whose price hasn't moved up by more than 10% over the past month.
Out of the 19 stocks the screen returned, here are three that are still attractively priced and that some CAPS members believe are ready to run today.
|
Stock
|
CAPS Rating Feb. 9, 2009
|
CAPS Rating May 8, 2009
|
Trailing
4-Week Performance
|
P/E Ratio
|
|
Fresh Del Monte Produce (NYSE: FDP )
|
**
|
***
|
(9.4%)
|
7.9
|
|
SureWest Communications (Nasdaq: SURW )
|
**
|
***
|
(4.3%)
|
6.1
|
|
Thomson Reuters (Nasdaq: TRIN )
|
**
|
****
|
8.8%
|
14.71
|
Source: Motley Fool CAPS Screener; price return from April 9 to May 8.
Though the results you get may be different because the data is updated in real time, you can run your own version of this screen. Let's take a look at why investors might think these companies will go on to beat the market.
Fresh Del Monte Produce
Both Fresh Del Monte Produce and rival Chiquita (NYSE: CQB ) were hit hard by poor weather recently. Fresh Del Monte Produce ended up with an abundance of melons of lower quality, resulting in lower profits. Yet Chiquita was able to surprise analysts with higher than expected profits because it has been increasing banana prices. When things stabilize, CAPS member mitleg is counting on Fresh Del Monte Produce to return to consistency.
Here is a product that will never go out of demand. They have excellent brand awareness, and complete market penetration. This firm has shown solid historical growth rates. It has moderate debt and margins.
SureWest Communications
A local provider of Internet, phone, and TV service, SureWest Communications was able to turn a profit in its latest quarter through a combination of expansion and cost-cutting. Pro forma broadband business revenue jumped 21%, and the number would have been better had the California economy not been in such lousy shape. Yet cost savings can only go so far before a business has to grow organically, so watch this one closely.
Thomson Reuters
Even if investors aren't aware of where their financial news comes from, there's a good chance it's Thomson Reuters. Now the company wants to bring its content to your iPhone and BlackBerry with a news application that exploits its multimedia capabilities. CAPS member KnockoutMouse says the ubiquity of its service and its cheap valuation makes Thomson Reuters a winning investment.
This company is the 900 lb gorilla of the financial info market. Don't believe me? Look up some finance numbers on this or any other website. Then look at the bottom of the page. Where did the numbers come from? Reuters. A good value with a PEG of 0.8, also pays a nice dividend.
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 have to say about these or any other stocks that you think are starting to rev their engines.
RSS Headlines
Fool UK