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 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 just 115 stocks when I ran it, no doubt reflecting the market's turmoil during that time, and included these recent winners:

Source: Motley Fool CAPS Screener; trailing performance from June 25 to Sept. 20.

Steve Madden Shoes, in fact, was previously picked as a stock ready to run in June, and represented a period when the market rose by 6%. 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 48 stocks the screen returned, here are three that are still attractively priced, but which investors think are ready to run today:

Source: Motley Fool CAPS Screener; price return from Aug. 27 to Sept. 20.

You can run your own version of this screen over on CAPS; just remember that the data are 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.

FSI International
Despite the weaker outlook in various sectors for tech bellwethers like Intel and Dell (Nasdaq: DELL), semiconductor capital equipment maker FSI International is looking forward to the rest of its fiscal year being no worse than what it was last year at least. The mid-range of its guidance for the fourth quarter is looking to be flat from the year-ago period, but analysts have started to rein in their own estimates (though further out they're looking for solid growth).

CAPS member Senescent thinks if FSI can hit its targets it will be doing very well indeed: "Seems to me that this stock could be very cheap if next year's projections come in on schedule."

Newmont Mining
The recession ended last year, or so they're saying. Oops, sorry if you didn't realize that. Like a zombie that doesn't know it's dead yet, our zombie economy doesn't realize it's still alive. That could be why gold prices continue to soar, hitting new records on a seeming daily basis. It's acting like the worst of the (ended) recession is still coming.

But higher prices will mean a glittering opportunity for Newmont Mining, Goldcorp (NYSE: GG), and Barrick Gold (NYSE: ABX), all of which ended their hedging practices betting gold was going to soar. With 92% of the more than 1,000 CAPS members who have rated Newmont expecting it to outperform the market, it would seem they agree there's still more room for prices to go higher still.

Prudential Financial
Highly rated CAPS All-Star member Wachman speculates that financial services and insurance provider Prudential Financial may become the target of someone's acquisition desires.

He might not be so far off the mark. While no one has mentioned Prudential yet, many names in the industry are suffering from weak valuations and a soft pricing environment. That's led some analysts to conclude that M&A activity is inevitable here and FBR Capital thinks one of the most likely candidates for a takeout is XL Group.

You can provide your view of the possibility for mergers and acquisitions here by heading over to the Prudential Financial CAPS page. You can also add the financial services provider to your My Watchlist page and receive all the Foolish news and analysis about this stock aggregated in one place.

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.