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 investors marked up before their share prices rose over the past three months. My screen returned just 83 stocks when I ran it, no doubt reflecting the market's turmoil during that time, and included these recent winners:
|
Stock
|
CAPS Rating, 1/25/11
|
CAPS Rating, 4/22/11
|
Trailing-13-Week Performance
|
| Agilysys |
**
|
***
|
92.8%
|
| Arena Pharmaceuticals |
**
|
***
|
26.6%
|
| Questcor |
**
|
***
|
40.1%
|
Source: Motley Fool CAPS Screener; trailing performance from April 21 to July 22.
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 64 stocks the screen returned, here are three that are still attractively priced but that investors think are ready to run today:
|
Stock
|
CAPS Rating, 4/15/11
|
CAPS Rating, 7/15/11
|
Trailing-4-Week Performance
|
P/E Ratio
|
| PNC Financial Services (NYSE: PNC ) |
**
|
***
|
0.6%
|
8.3
|
| Tuesday Morning (Nasdaq: TUES ) |
**
|
***
|
0.9%
|
15.1
|
| Unisys (NYSE: UIS ) |
**
|
***
|
7.7%
|
5.5
|
Source: Motley Fool CAPS Screener; price return from June 24 to July 22.
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.
PNC Financial Services
Fewer but healthier loans helped propel PNC Financial Services to a quarter of widening profits, although the trend also reduced interest income by almost 12%. PNC has seen the amount set aside for loan losses drop by almost two-thirds in the past year, more than what Wall Street was anticipating.
Maybe it's choosing the smarter long-term course. In contrast, several other banks have expanded their balance sheets lately. M&T Bank (NYSE: MTB ) , for example, broadened the amount of loans it had outstanding by 15% as it acquired Wilmington Trust. US Bancorp (NYSE: USB ) increased total loans by 4%.
CAPS member dipster12000 admits PNC has been down for some time but says getting paid to wait for the recovery is worthwhile: "Has been down too long. Will improve with economy, but has a fair dividend that will pay to wait."
Let us know on the PNC Financial Services CAPS page whether you can bank on a continued recovery.
Tuesday Morning
Discount home-goods retailer Tuesday Morning has given investors a discounted stock for much of the year, as shares trade 16% below where they started the year. In comparison, Big Lots (NYSE: BIG ) is some 18% higher.
Yet there's a reason why. Tuesday Morning's same store sales were down 4.5% in its fiscal fourth quarter as lower sales in June hurt operations. That forced the retailers to cut earnings guidance to $0.21 to $0.23 a share, down from forecasts it gave just last month of $0.25 to $0.30. Even Wal-Mart has been plagued by lower comps for eight consecutive quarters.
This is more of an industry issue rather than company-specific, so Tuesday Morning's lower price represents an opportunity. With 86% of the CAPS members rating the discount retailer to outperform the market, their convinced it is a good value. You can add Tuesday Morning to the Fool's free portfolio tracker and track its development on Wednesday evenings, Saturday afternoons, or whenever you like.
Unisys
After appearing here back in January, Unisys rocketed more than 50% higher in less than a month as hopes for hooking up with Apple (Nasdaq: AAPL ) spurred investor interest, only to give it all back in the following months as that failed to pan out. With earnings scheduled for after the market's close today, analysts are looking for Unisys to post a loss of $0.08 a share, compared with a profit of $1.37 a year ago as revenues are forecast to drop 10%.
CAPS members are more hopeful, though, with 72% of those rating it believing it can outperform the market indexes. Let us know on the Unisys CAPS page whether this business is ready to climb the heights once again.
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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