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 157 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 Aug. 28 to Nov. 26.

Chico's FAS, in fact, was previously picked as a stock ready to run in August, and represented a period when the market rose by 12%. 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 47 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 Oct. 29 to Nov. 26.

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.

Citizens Republic Bancorp
Despite taking TARP bailout money, Citizens Republic Bancorp wasn't required to perform a "stress test" nor raise any additional capital. After second-quarter results came in, I expressed concern the bank had massaged better earnings by significantly reducing its provision for loan losses. While larger banks like Wells Fargo (NYSE: WFC) had also engaged in such practices, the environment for commercial and residential mortgages has not improved all that much.

Citizens' third-quarter earnings seem to bear out that worrying detail as total delinquencies jumped almost 18% sequentially and Citizens was forced to boost its reserves by 27% to $89.6 million. However the bank is trying to deplete its portfolio of troubled loans and highly rated CAPS All-Star Drew2142 thinks the plan will ultimately pay off.

They're down, but they're far from out. Tough times means sharp declines in the "risky" banking industry today. I'm buying. Not for 1 week, not for 1 year, but for 5 years minimum. These guys have a plan, and they're working their plan. There will be ups and downs for while, but ultimately, this will end up.

Adding Citizens to your watchlist allows you to stay on top of all the Foolish news and analysis as they develop.

Kirkland's
Home goods retailer Kirkland's was another company with disappointing third-quarter results, but a profit forecast below that of analyst expectations pushed the stock down further. Some Wall Street analysts are expecting industry leader Bed Bath & Beyond (Nasdaq: BBBY) to face a tougher fourth quarter too, as comparisons from the strong year-ago period become difficult to mount. Yet despite the market's tumble on Friday, retailers in general are expecting a better Christmas season and the start to the holiday shopping season appears to have gotten off to a robust start.

Kirkland's and other retailers could end up surprising a wary analyst community and All-Star OracleofNormal believes Kirkland's is financially stable enough to do it: "Cheap retailer with [$59 million] net cash and solid free cash flow."

DTE Energy
Utility operator DTE Energy bucked the trend and reported earnings that were in line with analyst expectations while also being ahead of last year's results. Guidance for the year was tightened with the low end being raised and the top end narrowing, but with proposals on the table for a new reactor in Michigan, DTE becomes one of a number of companies looking for the bright glow of nuclear power to help fuel future growth. The government is financing two new reactors for Southern in Georgia while Progress Energy (NYSE: PGN) is lighting up a similar number in Florida.

With 20 reactors at 12 sites ready to go nuclear, it could help explain why 81% of the CAPS members rating DTE expect it to outperform the broad market averages. Let us known on the DTE Energy CAPS page whether it's an investment you should be making too.

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.