3 Stocks Ready to Roar

There are plenty of strategies for picking stock winners, from finding low P/E stocks to seeking companies selling at a discount to their future cash flows. At the small-cap investment service Motley Fool Hidden Gems, even in this market, the analysts stay ahead of the pack by finding undervalued stocks that Wall Street and investors have ignored.

But what if we could whittle down our list of prospects beforehand, to find those whose engines are just getting warmed up?

Using our investor-intelligence database at Motley Fool CAPS, I screened for stocks that were marked up by investors before their share prices rose over the past three months. My screen returned 145 stocks when I ran it, no doubt reflecting the market's continued recovery, and included these recent winners:

Stock

CAPS Rating
Aug. 17, 2009

CAPS Rating
Nov. 17, 2009

Trailing

13-Week Performance

Gulf Resources (Nasdaq: GFRE  )

**

***

17.7%

Newcastle Investment

**

***

8.0%

Whole Foods Market (Nasdaq: WFMI  )

**

***

30.3%

Source: Motley Fool CAPS Screener; trailing performance from Nov. 20 to Feb. 17.

Gulf Resources, in fact, was picked as a stock ready to run just last November. But while this screen might tell us which stocks we should have looked at three months ago, we'd rather find 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 in CAPS, sport valuations lower than the market's average, and whose prices haven't appreciated by more than 10% in the past month.

Of the 62 stocks the screen returned, here are three that are still attractively priced:

Stock

CAPS Rating
Nov. 17, 2009

CAPS Rating
Feb. 17, 2010

Trailing

4-Week Performance

P/E Ratio

Coinstar (Nasdaq: CSTR  )

**

***

8.0%

15.8

Immunomedics (Nasdaq: IMMU  )

**

***

(20.5%)

7.7

Telestone Technologies (Nasdaq: TSTC  )

**

***

7.9%

17.7

Source: Motley Fool CAPS Screener; price return from Jan. 22 to Feb. 17.

You can run your own version of this screen over on CAPS; just remember that the data is updated in real time, so your results may vary. That said, let's examine why investors might think these companies will go on to beat the market.

Coinstar
Serving as a supplement to the Netflix (Nasdaq: NFLX  ) movie-by-mail rental service, Coinstar's kiosk model got a big boost when the rental company announced that it had settled its dispute with Time Warner (NYSE: TWX  ) studios over when it could begin offering newly released titles. Because Coinstar's workaround of buying the DVDs through retail when they hit the stores on the movie's "street date" was an expensive proposition, look for its profits to continue to get two thumbs up.

Yet as much as CAPS member cahhorn likes Coinstar, even as an acquisition candidate, he does not see it as a long-term holding:

After the expected Amazon-Netflix deal, Coinstar (Redbox) looks like an attractive acquisition for any firm looking to have a piece of the changing structure of media. That said, eventually we are all going to get our flix via the web, so I do not think that CSTR is an extremely long-term play.

Immunomedics
CAPS member 21popsontop is keeping an eye on biopharmaceutical company Immunomedics because of its numerous levers for growth, including a monoclonal antibody to treat cancer, which just received a patent:

Diagnostic Substances with a few pots in the fire and some good numbers thus far for a penny stock. 299mil small cap ROE around 220% Gross Margins 66% Net Profit Margin around 57% 5year sales growth 47% 1st quarter 2010 of 0.42 a share was 1,500% better than 1st quarter 2009. Current quarter earnings estimates increased and should company continue like it's going then it's getting attractive on the down trend. One to watch.

Telestone Technologies
Wireless network operator Telestone Technologies was recently identified as a stock that was heating up because of its collaboration with Chinese telecom providers and that country's decision to invest about $66 billion in 3G initiatives.

CAPS member wljfool apparently subscribes to the theory that a rising stock price will benefit from growing earnings derived from rising sales:

Telestone has increased its sales 32% and [earnings per share] by 20% over the last 3 years. Last qtr eps was up more than 250%. This improving performance, and thus share price increase should continue

Three for free
Are these companies still a good value and ready to make their move? I'm heading over to CAPS to mark them to outperform the broader averages. To share your opinion, join me there, or let us know what you think in the comments section below.

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?

Netflix and Whole Foods Market are Motley Fool Stock Advisor selections. Try any of our Foolish newsletter services today, free for 30 days.

Fool contributor Rich Duprey does not have a financial position in any of the stocks mentioned in this article. You can see his holdings. The Motley Fool has a disclosure policy.


Read/Post Comments (0) | Recommend This Article (5)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1115516, ~/Articles/ArticleHandler.aspx, 9/16/2014 11:42:14 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement