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 106 stocks when I ran it, no doubt reflecting the market's turmoil during that time, and included these recent winners:
|
Stock
|
CAPS Rating 10/19/10
|
CAPS Rating 1/19/11
|
Trailing
13-Week Performance
|
| Cepheid |
** |
*** |
30.1% |
| Credit Acceptance |
** |
*** |
41.2% |
| Keryx Biopharmaceuticals |
** |
*** |
29.1% |
Source: Motley Fool CAPS screener; trailing performance from Jan. 21 to April 19. CAPS rating = out of five stars.
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 34 stocks the screen returned, here are three that are still attractively priced, but which investors think are ready to run today:
|
Stock
|
CAPS Rating 1/19/11
|
CAPS Rating 4/19/11
|
Trailing
4-Week Performance
|
P/E Ratio
|
| Cymer (Nasdaq: CYMI ) |
** |
*** |
(9.1%) |
16.5 |
| Tyson Foods (NYSE: TSN ) |
** |
*** |
(2.9%) |
8.0 |
| Venoco (NYSE: VQ ) |
** |
*** |
(3.2%) |
13.3 |
Source: Motley Fool CAPS screener; price return from March 25 to April 19. CAPS rating = out of five stars.
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.
Cymer
In crisis there is opportunity. That old saying applies to semiconductor equipment company Cymer, which saw many of its rivals devastated by the Japanese earthquake and tsunami. Although it has been surprising the markets for some time now, Taiwan Semiconductor Manufacturing (NYSE: TSM ) recently reduced its guidance because of the situation in Japan.
Cymer has been a beneficiary of Intel's (Nasdaq: INTC ) capital spending and that chip maker just reported earnings that not only beat analyst expectations, but said they were all wet when it came to their predictions for PC sales contraction. Intel is still looking for double-digit growth this year and sees no reason why 2012 shouldn't be just as good.
Cymer might have fallen almost 15% from its 52-week highs, but if Intel's prediction holds, look for Cymer to beat the Street again. That could be why all but one of the CAPS All-Stars rating it believe it will outperform the broad market averages. Let us know on the Cymer CAPS page if you think it will still short circuit.
Tyson Foods
Japan also represents a chance for Tyson Foods to grow. The beef and poultry industry there was crushed by the tragic events, giving America's largest meat processor, Smithfield Foods (NYSE: SFD ) , the opportunity to ship more pork there to help meet demand. But analysts say supplies in the U.S. are tight, so with these processors sending more meat overseas to replenish inventories, prices are going to rise.
Yet just slightly more than three-quarters of the 320 CAPS members rating Tyson believe it will top the indexes. Tell us on the Tyson Foods CAPS page whether investors will be squealing with delight at the results that are to come.
Venoco
When it comes to oil and gas exploration, shale plays like Marcellus, the Bakken, and even the Niobrara get a lot of attention. The Monterey shale area in California being exploited by Venoco, not so much. Until it can prove the viability of the region, the market is going to hold off assigning higher valuations to the company.
Occidental Petroleum (NYSE: OXY ) also has a sizable stake in Monterey (some 1.3 million acres) and plans on spending billions there over the next few years. Venoco also has committed much of its capital spending to developing its operations, but without any notable success so far, its stock has fallen by almost 25% over the past three months.
CAPS All-Star awdaniels says that if Venoco can prove itself, watch out!
This is a true California pure play. If the Monterey Shale proves out, the sky is the limit. Drilling 20 horizontal wells 2011 and odds are in my favor.
Drill down further on the Venoco CAPS page then add it to the Fool's free portfolio tracker and see if it makes good on its promise.
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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