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

Stock

CAPS Rating 11/11/10

CAPS Rating 2/11/11

Trailing 13-Week 
Performance

Acacia Research

**

***

49.6%

Encore Capital Group

**

***

32%

Endologix

**

***

28.4%

Source: Motley Fool CAPS Screener; trailing performance from Feb. 11 to May 11.

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 56 stocks the screen returned, here are three that are still attractively priced, but which investors think are ready to run today:

Stock

CAPS Rating 2/11/11

CAPS Rating 5/11/11

Trailing 4-Week Performance

PE Ratio

Six Flags Entertainment (NYSE: SIX  )

**

***

9.7%

5.0

True Religion Apparel (Nasdaq: TRLG  )

**

***

7.2%

16.1

Whirlpool (NYSE: WHR  )

**

***

(2%)

10.5

Source: Motley Fool CAPS Screener; price return from April 15 to May 11.

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.

Six Flags Entertainment
Theme park operator Six Flags Entertainment might have to change its tag line to "More shares. More fun." after its decision to split shares at a two-to-one ratio, though at around $75 a stub they weren't all that expensive to begin with. Director Usman Nabi, however, will be having all kinds of fun then if Six Flags is as bullish as a stock split tries to suggest. He purchased nearly $53 million worth of stock just last month.

We're heading into the busy season for Six Flags, Cedar Fair (NYSE: FUN  ) , and Great Wolf Resorts (Nasdaq: WOLF  ) . First quarters tend to be money-losers for theme parks, and Six Flags was no exception, but it has become a viable operator now and losses came in much less than expected. It could offer more muscular results over the next few quarters as the economy improves.

Less than two dozen CAPS members have weighed in on Six Flags, though the half dozen All-Stars are unanimous in their belief it will go on to beat the broad market indexes. I've gone and rated the it to outperform, so join me on the Six Flags Entertainment CAPS page and share your thoughts why it can still be a thrill ride higher.

True Religion Apparel
As Coach  (NYSE: COH  ) continues to prove its worth, the appeal of luxury goods is still a comforting niche, but the premium denim market represented by True Religion and VF's (NYSE: VFC  )  7 for All Mankind needs to contend with the commodities bubble. Sure, some commodities have been in a rout lately, but even after pulling back from its recent highs, cotton is still 21% higher than where it started the year.

Like stock splits, insider sales may mean nothing, but True Religion's CEO was dumping more than $10 million worth on the open market last week. After hitting a 52-week high at the end of April, they've peeled back about 10%. But will the commodities bubble bursting allow the jeans maker to continue its torrid growth?

CAPS member Jfitch22 says they're a financially stable company making it a long-term winner.

True Religion Jeans is a fantastic company to invest in. They carry no debt whatsoever, while maintaining growth every quarter. I expect them to remain stable for the next 5 years.

Tell us on the True Religion CAPS page whether it will need divine intervention to keep it moving higher.

Whirlpool
Those higher commodities costs have taken a toll on appliance maker Whirlpool, but it was still able to eke out a 3% increase in profits in the latest quarter. After the housing market imploded, it was helped by the government's "cash for refrigerators" program that gave away tax dollars to upgrade to energy efficient appliances. Its own earnings were helped along by receiving as much as $350 million in energy tax credits, yet sales also rose 7% and with the economy improving, consumers may just want to buy more washers and dryers as well as go for roller coaster rides at Six Flags.

That, plus a global presence leads pbk100 to believe Whirlpool will beat the market going forward. Wash, rinse, and repeat your own opinion on the Whirlpool CAPS page and add the stock to the Fool's free portfolio tracker.

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.

Coach is a Motley Fool Stock Advisor selection. The Fool owns shares of Coach. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Fool contributor Rich Duprey does not have a financial position in any of the other stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.


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