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 113 stocks when I ran it, no doubt reflecting the market's turmoil during that time, and included these recent winners:
|
Stock
|
CAPS Rating 7/19/10
|
CAPS Rating 10/19/10
|
Trailing 13-Week Performance
|
| Atlas Energy |
**
|
***
|
51%
|
| Banner |
**
|
***
|
45.5%
|
| OshKosh (NYSE: OSK ) |
**
|
***
|
26.7%
|
Source: Motley Fool CAPS Screener; trailing performance from Oct. 29 to Jan. 28.
OshKosh, in fact, was previously picked as a stock ready to run in August, and represented a period when the market rose by 8%. 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 49 stocks the screen returned, here are three that are still attractively priced, but that investors think are ready to run today:
|
Stock
|
CAPS Rating 10/28/10
|
CAPS Rating 1/28/11
|
Trailing 4-Week Performance
|
P/E Ratio
|
| EasyLink Services International (Nasdaq: ESIC ) |
*
|
***
|
(3.9%)
|
7.6
|
| Universal Truckload Services (Nasdaq: UACL ) |
**
|
*****
|
(5.8%)
|
21.1
|
| Volterra Semiconductor (Nasdaq: VLTR ) |
**
|
***
|
4.2%
|
21.9
|
Source: Motley Fool CAPS Screener; price return from Dec. 31 to Jan. 28.
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.
EasyLink Services International
Twitter processes something like 1 billion SMS messages every month, though for most users they'd never realize that TeleCommunication Systesm (Nasdaq: TSYS ) was the one powering that technology. You might want to think of EasyLink Services as trying to accomplish a similar feat for document transmissions with its supply chain and on-demand business messaging services. Through email, fax, and even telex (yes, it still exists!), EasyLink provides services to 14,000 accounts that range in size from Fortune 500 companies to sole proprietorships.
CAPS member JPNot sees EasyLink as an interesting cloud computing play, but the company is currently flying under the radar of both Wall Street and Main Street, though virtually all who rate it see it as outperforming the broad market averages. You can add it to your watchlist and stay on top of all the Foolish news and analysis as they develop.
Universal Truckload Services
The recession ripped the country's trucking industry asunder as freight volumes rapidly fell. YRC Worldwide (Nasdaq: YRCW ) almost went bankrupt as a result, though as trucking volumes return we're seeing YRC climb out of the hole. According to the American Trucking Association, December truck tonnage volumes reached their highest levels since 2008. That's good news for asset-light trucking operations like Universal Truckload Services.
In the asset-light model, Universal relies upon a network of owner-operators to provide over-the-road trucking services. In last year's September quarter, revenues were up 22% as load counts improved over the year-ago period. Analysts are looking for a 17% increases in revenues this quarter, generating a 73% increase in profits.
With only a few dozen CAPS members tipping the scales for the trucker, 83% think it will roll on to greater growth ahead. Hitchhike over to the Universal Truckload Services CAPS page and let us know if you agree.
Volterra Semiconductor
As hot as the storage sector has been, Xyratex (Nasdaq: XRTX ) took a hit earlier this month when it reported disappointing earnings, which was immediately followed by Volterra Semiconductor lower its fourth-quarter guidance. But it now expects growth to resume to normal levels as the inventory correction has, um, corrected itself. Highly rated CAPS All-Star Gtrinvestor thinks Volterra's power supply chips are worth keeping an eye on to get a sense of how the whole sector is moving:
I don't know much about this company, but want to track it for its power products (more because of another company I am tracking produces power products as well and want to keep up on the competition). Company seems to be reasonable enough, but I wouldn't necessarily go out and by the stock tomorrow until I did more research on ths companies financials and markets.
You can add this semi specialist to the Fool's free portfolio tracker, then head over to the Volterra Semiconductor CAPS page and and chip in with your thoughts.
Three for free
Are these companies still a good value, and are they ready to make their move? I'm heading over to CAPS to mark them to outperform the broader averages. Join me there if you agree, 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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