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

Source: Motley Fool CAPS Screener; trailing performance from Sept. 30 to Dec. 28.

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 80 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 Dec. 2 to Dec. 28.

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

Magic Software Enterprises
With the proliferation of smartphones and mobile computing devices, Magic Software Enterprises is counting on its development of cloud-centric apps to carry it aloft. It has partnerships with both IBM (NYSE: IBM) and Microsoft, which utilize its uniPaaS and iBOLT platforms allowing businesses to rapidly customize and integrate applications into existing systems. And it just acquired AppBuilder from BluePhoenix for $13.5 million, which lets developers build, deploy, and maintain large-scale, custom-built business applications, but importantly gives the company a bigger footprint in Europe and Asia.

Magic is flying under the radar of much of Wall Street at the moment, but the CAPS community is starting to catch on and 94% of those rating the software developer believe it will outperform the broad indexes. I've added my name to those thinking it will succeed, but head over to the Magic Software Enterprises CAPS page and develop a case for your position. Track its progress by adding the stock to your watchlist.

DISH Network
It was a nine-month race, but in the end, the hurdle of acquiring T-Mobile was too high for AT&T to jump over. That leaves it scouring the markets for someone else to buy because it's in desperate need of spectrum. Although some other spectrum-heavy names have risen to the surface as possible, including Metro PCS (NYSE: PCS), DISH Network makes more sense than most because in addition to having lots of spectrum available, it also has tons of content after acquiring the assets of bankrupt Blockbuster.

While DISH has said it would gladly join forces with T-Mobile if the AT&T deal fell through (it was also a big critic of the union), it may become a target of Ma Bell's need to keep pace with its rivals. In DISH Network, it would get prime real estate.

While 84% of the CAPS All-Stars feel DISH will outperform the market, all 18 analysts following it feel similarly. Add DISH Network to the Fool's free portfolio tracker to see if it becomes the hunter or the hunted.

EasyLink Services
Things haven't been so easy for EasyLink Services, a provider of supply chain and on-demand business messaging services. First-quarter 2012 earnings results didn't impress the market in December, despite revenues doubling and profits more than tripling. But that was largely due to acquisitions last year. On a sequential basis, growth was much more modest. It's also facing a patent infringement lawsuit from J2 Global that's scheduled to begin next month.

EasyLink is also flying below the attention of Wall Street right now, and much of Main Street as well, but mrindependent thinks it's value priced. At 37% below its 52-week high and trading at just five times trailing and forward estimates, I'm inclined to agree. I've also marked it to beat the Street, but give us your thoughts on the EasyLink Services CAPS page, then add it to your watchlist to be alerted on any developments.

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, then check out this free report on dividend-paying stocks whose engines are all revved up. You can read it for free, but hurry because it won't be around for long.