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 are able to 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 154 stocks when I ran it, no doubt reflecting the market's continued recovery, and included these recent winners:
|
Stock
|
CAPS Rating
9/8/09
|
CAPS Rating
12/8/09
|
Trailing
13-Week Performance
|
|
Goldman Sachs (NYSE: GS )
|
**
|
***
|
2.3%
|
|
IMAX (Nasdaq: IMAX )
|
**
|
***
|
18.0%
|
|
O'Reilly Automotive (Nasdaq: ORLY )
|
**
|
***
|
5.9%
|
Source: Motley Fool CAPS Screener; trailing performance from Dec. 11 to March 8.
O'Reilly Automotive, in fact, was picked as a stock ready to run this past 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 (out of five), sport valuations lower than the market's average, and haven't appreciated by more than 10% in the past month.
Of the 37 stocks the screen returned, here are three that are still attractively priced, but which investors think are ready to run today:
|
Stock
|
CAPS Rating
12/8/09
|
CAPS Rating
3/8/10
|
Trailing
4-Week Performance
|
P/E Ratio
|
|
Bancolombia (NYSE: CIB )
|
**
|
***
|
6.6%
|
14.9
|
|
Schweitzer-Mauduit International (NYSE: SWM )
|
**
|
***
|
(16.3%)
|
19.4
|
|
Sonoco Products (NYSE: SON )
|
**
|
***
|
4.3%
|
20.1
|
Source: Motley Fool CAPS Screener; price return from Feb. 12 to March 8.
You can run your own version of this screen on CAPS; just remember that the data's 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.
Bancolombia
The weakened state of global economies encouraged Colombian businesses to sell bonds rather than take out loans to finance projects, causing that country's largest bank, Bancolombia, to see its total loan portfolio shrink 6% in 2009. Indeed, it even used the proceeds from its debt offerings to pay off its loans.
However, Bancolombia is expecting the industry's loan portfolio to grow between 5% and 8% this year, underscoring the CAPS community's belief that this financial institution will outperform the market averages. Some 92% of CAPS members rating Bancolombia expect it to be a stellar performer in the months ahead.
Schweitzer-Mauduit International
Specialty paper maker Schweitzer-Mauduit International will remain the sole supplier to Philip Morris (NYSE: PM ) for its specially designed cigarette paper, but the tobacco king has indicated it will be looking for alternatives to that technology. The stock sunk as that news followed in the wake of disappointing quarterly earnings and an announcement that SWM was taking on a number of rivals in wide-ranging patent infringement lawsuits.
CAPS All-Star member SarahGen admits to not being intimately knowledgeable about the paper maker's operations, but the broad sell-off in shares was too much to ignore. Writing last month, SarahGen said:
SWM was down over 30% on earnings and lawsuit news yesterday. And it was on huge volume. That just seemed like too much to me. So no, I'm not a longtime follower of SWM with great wisdom to share, but that was a pretty obvious opportunity.
Sonoco Products
Going the other way with earnings was industrial and consumer products packaging specialist Sonoco Products, which posted a 31% increase in fourth-quarter profits that easily bested the market's expectations.
Although it remains generally underfollowed on CAPS, with just more than 100 members rating the company (90% of them see it outperforming the market), nine Wall Street analysts cover this Motley Fool Income Investor recommendation, and they are unanimous in their opinion about its prospects for beating the averages.
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. If you agree join me there, or let us know in the comments section below what you think?
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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