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 155 stocks when I ran it, no doubt reflecting the market's continued recovery, and included these recent winners:
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Stock
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CAPS Rating 11/11/09
|
CAPS Rating 2/11/10
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Trailing 13-week Performance
|
|
Delcath Systems
|
**
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***
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146.6%
|
|
Franklin Electric
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**
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*****
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21%
|
|
Immunomedics (Nasdaq: IMMU )
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**
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***
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17.5%
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Source: Motley Fool CAPS Screener; trailing performance from Feb. 12 to May 11.
Immunomedics, in fact, was previously picked as a stock ready to run just this past February. 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 51 stocks the screen returned, here are three that remain attractively priced, but which investors think are ready to run today:
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Stock
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CAPS Rating 1/27/09
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CAPS Rating 5/11/10
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Trailing 4-Week Performance
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P/E Ratio
|
|
Lear (NYSE: LEA )
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**
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***
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(9.1%)
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4.7
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Anheuser-Busch InBev (NYSE: BUD )
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**
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***
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0.2%
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17.2
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TJX (NYSE: TJX )
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**
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***
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0.2%
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16.1
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Source: Motley Fool CAPS Screener; price return from April 16 to May 10.
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.
Lear
Companies returning to the public markets after bankruptcy should be in a better position to capitalize on opportunities. They've slimmed down, discharged debts, and possibly brought in new management. Auto parts supplier Lear came out from under court protection last winter, just in time to see Ford (NYSE: F ) and GM catch a wave of pent-up consumer demand. Now Lear needs to keep the momentum going.
CAPS member Dobbes thinks investors should remember a few big caveats: "Massive EPS losses and negative stockholder equity. If the bank gets tired of their inability to make money they are headed straight to bankruptcy."
Anheuser-Busch InBev
I'll drink to that! Anheuser-Busch InBev, the world's largest brewer, has cooked up its second straight quarterly batch of rising sales and volume. That's not an easy feat when you consider Bud and Boston Beer (NYSE: SAM ) -- the brewer of my favorite beverage, Sam Adams Lite -- were two of only a handful of brewers able to tap into heady volume increases. Both Heineken and MolsonCoors recorded declines.
CAPS member joebud1960 was impressed less by Anheuser's slight rise in revenue, and more by its ability to keep costs contained: "cost per barrel is lowered so much they are makingbookoo bucks even though sales are flat."
TJX
Are you a "Maxx-inista"? TJX's discount reputation at its TJ Maxx, Marshalls, and HomeGoods stores gained traction in April; same store sales rose 4%, even as recessionary standouts like The Buckle (NYSE: BKE ) recorded a rare comps decline. lewloG thinks TJX has wall-to-wall opportunities:
Tremedous marketing skills, terrific growth in retail, powerful group movement (retail stores), excellent market positioning, unique positioning in ladies clothing sales, consistent management
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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