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 find undervalued stocks ignored by Wall Street and investors alike.
Yet what if we could find a way to whittle down our list of prospects beforehand, finding those stocks whose engines are just getting warmed up?
Using our Motley Fool CAPS investor intelligence database, 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 latest screen returned 152 stocks, including these recent winners:
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Stock
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CAPS Rating, Dec. 9, 2008
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CAPS Rating, March 9, 2009
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Trailing 13-Week Performance
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AerCap (NYSE: AER )
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**
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***
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139.6%
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Ariad Pharmaceuticals (Nasdaq: ARIA )
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**
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***
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37.6%
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Canadian Solar (Nasdaq: CSIQ )
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**
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***
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309.1%
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Source: Motley Fool CAPS screener; trailing performance from March 13 to June 8.
Both AerCap and Canadian Solar, in fact, were previously picked as stocks ready to run, featured here in January and December, respectively. So while this screen might tell us which stocks we should have looked at three months ago, we'd rather discover which stocks 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 with a price that hasn't moved up over the past month by more than 10%.
Here are three stocks out of the 32 the screen returned that are still attractively priced, but which investors think are ready to run right now!
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Stock
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CAPS Rating, March 9, 2009
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CAPS Rating, June 8, 2009
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Trailing 4-Week Performance
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P/E Ratio
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Cincinnati Bell (NYSE: CBB )
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**
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***
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10.0%
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6.2
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DRDGOLD (Nasdaq: DROOY )
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**
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***
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5.9%
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5.2
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ProAssurance (NYSE: PRA )
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**
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***
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6.6%
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9.4
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Source: Motley Fool CAPS screener; price return from May 15 to June 8.
The data is dynamically updated in real time, so if you run your own version of this screen, your results may vary. For now, let's examine why investors might think these companies will go on to beat the market.
Cincinnati Bell
The decline of wireline services is slowly eating away at Cincinnati Bell, but top-rated CAPS All-Star member kristm is sticking with it:
Makes dependable money from its landline exclusivity, that business is fading but still produces earnings. Wireless business is well regarded and possibly makes the whole company a buyout candidate for any existing telecom, Verizon, Qwest, or possibly even AT&T if they can get past that whole antitrust thing... Could also split with someone like Verizon picking up the mobile business and Windstream buying out their fixed line service.
DRDGOLD
Gold hasn't lost any of its luster, still trading near $950 an ounce. Some analysts note the improving balance sheets of gold miners such as DRDGOLD and Harmony Gold (NYSE: HMY ) , as well as the rising price of gold, and conclude that miners' stocks will climb further in the future. Not so for CAPS All-Star OptionsWizard, who called a top to DRDGOLD's price back in March.
ProAssurance
Although medical malpractice insurer ProAssurance reported a 21% drop in year-over-year profit in the first quarter, 95% of the CAPS members (and 100% of All-Stars) rating the company believe it will outperform the market. Shares are down only 5% over the past year, while the companies tagged in CAPS as Property & Casualty Insurance are down more than 14% over that same period. In short, ProAssurance has managed to hold its own in a difficult climate.
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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