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 181 stocks when I ran it, no doubt reflecting the market's continued recovery, and included these recent winners:
|
Stock
|
CAPS Rating 11/3/09
|
CAPS Rating 2/3/10
|
Trailing 13-week
Performance
|
|
Aeropostale (NYSE: ARO )
|
**
|
***
|
29%
|
|
Broadcom
|
**
|
***
|
14.8%
|
|
Cerus
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**
|
***
|
45.1%
|
Source: Motley Fool CAPS Screener; trailing performance from Feb. 5 to May 4.
Aeropostale, in fact, was previously picked as a stock ready to run last November. Starting in February, it began to do so. 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. I went back to the screener and looked for stocks that were just bumped up to three stars or better, sport valuations lower than the market's average, and haven't appreciated by more than 10% in the past month.
Of the 43 stocks the screen returned, here are three that are still attractively priced, but which investors think are ready to run today:
|
Stock
|
CAPS Rating 2/3/10
|
CAPS Rating 5/3/10
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Trailing 4-Week
Performance
|
P/E Ratio
|
|
Skechers USA (NYSE: SKX )
|
**
|
***
|
4.3%
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17.2
|
|
Xyratex (Nasdaq: XRTX )
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**
|
***
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(13%)
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19.2
|
|
Bunge (NYSE: BG )
|
**
|
***
|
(13.3%)
|
12.8
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Source: Motley Fool CAPS Screener; price return from Apr. 9 to May 4.
You can run your own version of this screen over on CAPS -- just remember that the data's dynamically 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.
Skechers USA
Footwear makers are kicking gloom to the curb with better than expected earnings reports. Sneaker maker Skechers USA and uber-comfy boot maker Deckers Outdoor (Nasdaq: DECK ) both reported earnings recently that surprised Wall Street by their strength. While it wasn't a big surprise that Deckers ubiquitous Ugg continued to kick up some dust with its sales increase, the Teva brand also dug its heels in with a 21% surge in sales. Skechers was also finding traction with its shape-up shoes that purportedly help you tone up just by wearing them. The sneaker maker reported record per share earnings of $1.15 which is even better than the forecasts analysts had projected of $1.03 per share and marks the seventh straight quarter of Wall Street-beating performance.
Highly rated CAPS All-Star member dockofthebay thinks there's nothing sketchy about Skechers, which is running at full tilt now: "Skechers has got it all together right now and I think that earnings will continue to blast past estimates for the rest of this year."
Xyratex
Got storage? If not maybe you should, as it's becoming a sexy sector again. Solid-state hard drive maker Compellent Technologies (NYSE: CML ) is due to heat up as its devices seek to supplant standard drives as the, um, standard storage device, while enterprise-level data storage specialist Xyratex was a hit with Wall Street last month after beating expectations.
kevinim89 thinks its solid balance sheet will lead to stock price gains in the future, but you can head over to the Xyratex CAPS page and add your opinion to the vast store of knowledge accumulating there.
Bunge
Global agricultural products company Bunge is looking for China to be the catalyst for future growth as it becomes a net importer of corn. Price of the feed stock jumped last week when it was reported the country had made its first purchase of corn in four years. That may be good news for Bunge and fertilizer companies like Potash (NYSE: POT ) , but consumers are likely not to be too happy about the upward pressure that's likely to put on food prices.
More than 93% of the 728 CAPS members that rate the food processor say it will outperform the market but we'll lend you our ear on the Bunge CAPS page to tell us whether you think it will have an easier row to hoe.
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 whether you think these or any other stocks are starting to rev their engines.
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