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 16 stocks when I ran it, no doubt reflecting the market's turmoil during that time, and included these recent winners:
|
Company
|
CAPS Rating April 11, 2011
|
CAPS Rating July 11, 2011
|
Trailing-13-Week Performance
|
| Alexion Pharmaceuticals |
** |
*** |
29.6% |
| Maxwell Technologies |
** |
*** |
29.1% |
| Cepheid |
** |
*** |
25.9% |
Source: Motley Fool CAPS; trailing performance from July 15 to Oct. 10. 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 77 stocks the screen returned, here are three that are still attractively priced but which investors think are ready to run today:
|
Company
|
CAPS Rating July 11, 2011
|
CAPS Rating Oct. 10, 2011
|
Trailing-4-Week Performance
|
P/E Ratio
|
| Samson Oil & Gas (AMEX: SSN ) |
** |
*** |
(16.4%) |
4.1 |
| Medifast (NYSE: MED ) |
** |
*** |
(2.7%) |
11.3 |
| IntraLinks (NYSE: IL ) |
** |
**** |
(8.9%) |
6.4 |
Source: Motley Fool CAPS Screener; price return from Sept. 16 to Oct. 10. 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.
Samson Oil & Gas
With a comparatively large exposure to the Niobrara oil play through its Hawk Springs project, but also in the Bakken, where it recently acquired 20,000 acres with an option to buy 70,000 acres more, Samson Oil & Gas is ready to capitalize on its expanded drilling program.
After selling off its Greater Green River Basin properties in Wyoming to Chesapeake Energy (NYSE: CHK ) , Samson paid off its debt and bolstered the cash it has sitting in the bank, making for a very nimble operator. Since it trades at less than five times earnings it offers a more attractive valuation than peers EOG Resources (NYSE: EOG ) , at 52 times, or Brigham Exploration at 38 times.
Samson flies under Wall Street's radar, but more than 220 CAPS members have drilled down into the oil and gas play, and 89% believe it will outperform the broad market averages. If you think it will hit a gusher, share your thoughts on the Samson Oil & Gas CAPS page, then put it on your watchlist to keep track of its progress.
Medifast
There are fat profits to be made in weight loss, and Medifast is recovering after the setback of having to restate financials. It saw double-digit sales growth in both its direct sales and direct response divisions as it has opened new weight-control centers this year. The earnings report missed analyst expectations, however, which caused the stock to drop, with Weight Watchers also disappointing investors and the markets.
A combination of center growth along with expansion of its coaching network should allow it to gain a further foothold in a market dominated by Weight Watchers, Nestle's Jenny Craig, and NutriSystem (Nasdaq: NTRI ) .
CAPS member tomfoolme looks at Medifast's valuation metrics and sees a cheaply valued stock, which comports with the outlook of the broader community, where 85% of those weighing in on the weight-loss specialist see more than just slim pickings here. Tell us in the comments section below or on the Medifast CAPS page whether investors ought to gorge themselves on the stock, and add it to your watchlist to be notified of its progress.
IntraLinks Holdings
IntraLinks Holdings tackles complex, paperwork-intensive transactions that are time-sensitive in nature and puts the entire massive paperwork burden in the cloud, thus creating a simplified and organized arena where all parties involved can share and collaborate on the work. Importantly, the software-as-a-service platforms created are secure, compliant, and auditable, so there is a record of who did what when.
Extra competition has weighed on IntraLinks' earnings -- Epiq Systems targets bankruptcy proceedings, and business-printing-services provider R.R. Donnelley & Sons (Nasdaq: RRD ) thought the virtual-data-room arena profitable enough to take a stab at it too -- but all 23 All-Star CAPS members considering the potential of this low-flying information specialist think it will be able to beat the Street going forward.
You can provide your own opinion of its prospects, intensive or not, on the IntraLinks CAPS page, then add the stock to the Fool's free portfolio tracker to see if it can organize a recovery.
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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