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 discounts 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 15 stocks, no doubt reflecting the market's turmoil during that time, and included these recent winners:

Source: Motley Fool CAPS screener; trailing performance from July 1 to Sept. 26. 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. So 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 70 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 Sept. 2 to Sept. 26. CAPS rating = out of five stars.

You can run your own version of this screen on CAPS; just remember that the data are 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.

Culp
You might not want to take Culp's chances for growth lying down. The maker of mattress and upholstery fabrics is expected to grow profits next year by more than 32%, after an expected 10% drop this year. At less than seven times forward earnings estimates, it is looking exceptionally cheap.

With bed maker Select Comfort (Nasdaq: SCSS) more than doubling over the past year and TempurPedic nearly so, there's the possibility for Culp to follow them up. Highly rated CAPS All-Star tenmiles thinks it's simply a good value stock:

No High Point hottie, but sticking deep value Culp under the mattress anticipating better times ahead after recent sell-off. Shareholder equity up roughly 20% YOY; stock buyback in place; relatively strong balance sheet for small cap - survivor trading at a discount - buyer around $8.40

Is Culp a sleeper of an opportunity? Follow its progress by adding the stock to your watchlist.

Nokia
It's been a long time since Nokia was an innovative leader in cell phones, dragged down by Symbian, its smartphone operating system, and a lackluster design team. Apple's iPhone sounded the death knell. Yet despite all that, Nokia remains the world's largest handset maker on volume, and though sales have been anything but robust, it has plenty of cash on hand to allow its new management team the breathing room needed for a turnaround.

Nokia's shares are down nearly 50% from their 52-week highs and trade at levels not seen in more than a decade. But its deal with Microsoft (Nasdaq: MSFT) to adopt the Windows OS for its phones has CAPS member BrightEyed seeing it dialing up growth in the future: "Nokia is about to embark on a new product cycle with smartphones switching to the Windows 8 platform, which should be groundbreaking."

You can add the handset maker to the Fool's free portfolio tracker to keep tabs on its progress over the coming quarters.

Powerwave Technologies
Nokia's not the only one counting on the deal with Microsoft to pan out. Powerwave Technologies depends heavily on Nokia through a joint venture it has with Siemens (NYSE: SI) for 28% of its revenues. A healthy, thriving Nokia means Powerwave will be able to continue selling its wireless networking equipment, like base stations and antennas and supporting equipment.

With 92% of the CAPS members weighing in on Powerwave believing it will outperform the broad market averages, it's clear they believe the equipment maker will be able to dial up growth in the future. Add your opinion on the Powerwave Technologies CAPS page and follow along by adding the stock to your watchlist.

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.