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 146 stocks when I ran it, no doubt reflecting the market's turmoil during that time, and included these recent winners:
|
Stock
|
CAPS Rating 4/7/10
|
CAPS Rating 7/7/10
|
Trailing 13-week Performance
|
| Keithley Instruments |
**
|
***
|
135.6%
|
| Synta Pharmaceuticals (Nasdaq: SNTA ) |
**
|
****
|
34.6%
|
| Uranium Resources |
**
|
***
|
205.6%
|
Source: Motley Fool CAPS Screener; trailing performance from July 9 to Oct. 7. Ratings out of 5.
Synta Pharmaceuticals, in fact, was previously picked as a stock ready to run in April, and represented a period when the market rose by just more than 7%. 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:
|
Stock
|
CAPS Rating 7/1/09
|
CAPS Rating 9/30/10
|
Trailing 4-Week Performance
|
P/E Ratio
|
| China Automotive Systems (Nasdaq: CAAS ) |
**
|
***
|
4.6%
|
14.8
|
| J. Crew Group (NYSE: JCG ) |
**
|
***
|
(2.3%)
|
13.5
|
| Time Warner (NYSE: TWX ) |
**
|
***
|
(3.1%)
|
14.0
|
Source: Motley Fool CAPS Screener; price return from Sept. 10 to Oct. 7.
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.
China Automotive Systems
Even after a big run-up in price over the past year, China Automotive Systems could be on pace for further gains. Like another Chinese auto-parts maker, Sorl Auto Parts (Nasdaq: SORL ) , which beat analyst estimates and guided higher than their forecasts for the third quarter, China Automotive expects the industry to continue its improvement. It's ramping up its production capabilities as a supplier for Chrysler cars.
Roughly 90% of the CAPS members who've rated the auto parts maker expect. it to outrace the market. Apply the brakes on the China Automotive Systems CAPS page if you think this stock is ready to overheat.
J. Crew Group
At just 13 times trailing and forward earnings estimates, J. Crew Group is a bargain compared to Abercrombie & Fitch (NYSE: ANF ) or Ann Taylor at more than 30 times profits each, particularly when compared to their growth prospects. CAPS member OrangeCrema says J. Crew exhibits better style than Abercrombie, while pchop123 says its underperforming the rest of the retail industry is about to change.
You can add J. Crew Group to your My Watchlist page and have all the Foolish news and analysis about this retailer compiled together for you in one place.
Time Warner
If the rumors are to be believed -- and some smart Fool says they're not -- AOL, after having just recently gotten free of the yoke of Time Warner, is looking to get tied up again, this time to Yahoo! (Nasdaq: YHOO ) . As far-fetched as it might be, Time Warner itself was looking to put another millstone around its neck by making a (lowball) bid for movie studio MGM.
One has to imagine that of the 1,242 CAPS members rating the media mogul, the 85% who believe Time Warner will beat the broad market averages believed it would be a better company when it was free and clear of AOL. How about you? Let us know on the Time Warner CAPS page if you think the entertainment powerhouse should be looking to make more acquisitions.
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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