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?
To seek out the most stocks attractive today, I used a 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 44 stocks the screen returned, here are three that are still attractively priced, but which investors think are ready to run today:
CAPS Rating, Jan. 27 (out of 5)
CAPS Rating, April 26 (out of 5)
Trailing 4-Week Performance
|CH Robinson Worldwide (NYSE: CHRW )||**||***||(7%)||22.6|
|Eastman Chemical (NYSE: EMN )||**||***||4.3%||11.1|
|Hershey (NYSE: HSY )||**||***||8.6%||22.9|
Source: Motley Fool CAPS Screener; price return from March 30 to April 25.
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.
CH Robinson Worldwide
Transportation logistics specialist CH Robinson Worldwide just reported first-quarter earnings that greatly disappointed the market and sent its shares tumbling. Despite greater volumes and higher pricing in its trucking, intermodal, and ocean segments that pushed gross profits higher (though not as much as Wall Street anticipated), it also faced higher costs and expenses, and air transport services actually saw profits plunge because of weak pricing.
Not surprisingly, rising fuel prices outpaced its ability to raise prices, but it's not alone as Expeditors International (Nasdaq: EXPD ) warned it was going to miss expectations as well, though its problems stem from lower volumes. All in all, CH Robinson is actually better positioned to rebound here, and a clean balance sheet gives it more flexibility. CAPS member Charlotte49er views it as "seriously oversold." Add CH Robinson's stock to the Fool's free portfolio tracker to see if it can drive up greater profits going forward.
Created to make products for iconic film and camera maker Eastman Kodak in 1920 and spun off in 1994, global chemical specialist Eastman Chemical finds itself in much better financial shape than its bankrupt former parent. But higher costs also hit the bottom line, as net profits fell 34% from the year-ago period.
Still, Eastman's acquisition of automotive and architectural specialty chemicals maker Solutia is almost complete. Further, the company has broken ground on a new facility in China to produce acetate tow for cigarette filters; it expects to experience 10% compound annual growth for the next few years in the Asia-Pacific region. Finally, stronger results in the U.S. allowed Eastman to raise its full-year earnings guidance to $5.30 a share from the prior forecast of $4.35 that it issued in January.
With 87% of the CAPS members rating the chemicals maker to outperform the broad indexes, it's clear they think it will be spared the fate of the photography giant that sired it. Let us know on the Eastman Chemical CAPS page if there's something special about its operations that will allow it to flourish.
Candy maker Hershey fared better than most in that it was able to sufficiently raise prices to meet its rising costs, and it saw first-quarter profits that rose 24% from the year-ago period, crushing analyst expectations and allowing it to raise guidance for the year. Although volumes were slightly lower, the second quarter seems like it should be a good one since Easter fell right at the beginning. With higher prices already in place -- Hershey raised them 10% to cover higher ingredients costs -- management is expecting "solid" results. It was a similar situation for Tootsie Roll (NYSE: TR ) , which also effectively increased prices to boost earnings and offset rising costs.
This year, CAPS All-Star bradford86 expressed skepticism over Hershey's high valuation, and if you compare it with its growth prospects, it does seem very overvalued. However, because Easter is bound to give results a sugar rush, I'm rating the chocolate maker to beat the market averages again for the next few months anyway, but tell us on the Hershey CAPS page or in the comments section below if its stock is still too rich for your tastes.
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.