3 Stocks Set to Soar

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

Stock

CAPS Rating 1/3/12

CAPS Rating 4/3/12

Trailing 13-Week Performance

Builders FirstSource

**

***

32.6%

PDF Solutions

**

*****

29.5%

Align Technology

**

***

27%

Source: Motley Fool CAPS Screener; trailing performance from April 5 to July 2.

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 18 stocks the screen returned, here are three that are still attractively priced, but that investors think are ready to run today:

Stock

CAPS Rating 3/5/12

CAPS Rating 7/5/12

Trailing 4-Week Performance

PE Ratio

Amdocs (NYSE: DOX  )

**

***

4.2%

14.2

Barclays (NYSE: BCS  )

**

***

(12.4%)

7.0

Swift Energy (NYSE: SFY  )

**

****

3.4%

10.0

Source: Motley Fool CAPS Screener; price return from June 8 to July 5.

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

Amdocs
Last quarter's results from customer relations management specialist Amdocs were strong, though you'd never know it since the stock dropped over 12% over the ensuing weeks. It's bounced off the lows it hit, but because its largest customer AT&T lost out on its bid to acquire T-Mobile, the revenue stream coming from that direction is muted. It previously expected total revenues to grow 5% to 6% in 2012, but now says it only anticipates a 3% to 4% increase. Profits, though, remain healthy and it expects non-GAAP EPS growth of 12% to 14% compared to prior expectations of 11% to 13%.

More than 200 CAPS members have weighed in on Amdocs, and 95% believe it will overcome the AT&T hiccup and still beat the market indexes. Tell me on the Amdocs CAPS page if you agree, then add its stock to the Fool's free portfolio tracker to follow its progress.

Barclays
Nothing like a little scandal to send your stock reeling 20% in a week, which is exactly where British banking giant Barclays finds itself after getting caught up in a bid to rig LIBOR rates. Foolish writer Daniel Ferry explains that Barclays falsely submitted what rates it was paying -- and investigations are under way at Bank of America (NYSE: BAC  ) , Citigroup (NYSE: C  ) , and JPMorgan Chase (among others), too -- as it would have allowed them to illegally profit while raising rates on mortgages, student loans, and businesses.

"If Barclays and other banks were able to successfully falsify this rate, even slightly," Ferry writes, "the result might be the largest securities fraud ever known."

The stock, though, seems to have already found a floor at its current level, and CAPS member callumturcan believes it is ready to bound higher: "Undervalued, trading at .37 book value. Good estimated growth rates going forward, and should pop once a new CEO is found." Let us know on the Barclays CAPS page if you'd deposit this stock in your account.

Swift Energy
Depressed natural gas prices have claimed another victim this earnings season as Swift Energy saw profits plunge 82% this past quarter and blew through the already reduced expectations analysts had set for the energy company. Coupled with rising expenses, the stock was cut in half.

It's managed to turn the corner a bit as the stock has inched higher, and it seems as if the worst of the natural gas pricing debacle is behind the industry, even if prices remain at historically low levels. Swift's oil production was up 6% from the year-ago period, and with sabers being rattled in the Middle East once more, we may see higher prices on that front.

Tell us on the Swift Energy CAPS page or in the comments section below if you think this energy stock can swiftly recover its footing.

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, and if energy stocks like Swift are your thing, then check out this free report on "The Only Energy Stock You'll Ever Need." You can read it for free, but hurry, because it won't be around for long.

Fool contributor Rich Duprey holds no position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool owns shares of JP Morgan Chase, Bank of America, and Citigroup. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


Read/Post Comments (2) | Recommend This Article (5)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 06, 2012, at 11:34 PM, MrSinnister wrote:

    When will Discovery Labs (DSCO) finally get some love? I mean they have 2 FDA approved products that go into distribution in the 4Q, with the FDA approval coming in March. They only have 43 million outstanding shares, with a current market cap of 125M which nearly multiplies with every 10 cent increase. They are going to distribute a drug for Respiratory Distress Syndrome for infants in the US and European markets, and they have TREMENDOUS upside, already up 60 percent on the year. Add to that two more drugs awaiting approval, Aeroserf, that is in a collaboration with Batelle to get streamlined and fine-tuned and Surfaxin LS, a liquid version of their already FDA-approved drug Surfaxin. How this stock stays in the 2 range is amazingly shortsighted.

    Value of Surf LS + Afectair: 275million

    Shares O/S: 43mil

    Tell me why we can't see $40+/share with DSCO. Note that my sell target is below this, but I expect the stock to soar once it gains momentum. Imagine that liquid surfaxin penetrates the market quickly and gets great reviews by practicing docs (which it should). Surf LS will be even better. And Aerosurf even better after that.

    Facts:

    1. one approved device

    2. one approved drug

    3. $40 million in cash

    4. no debts

    5. no preferred stocks

    6. no impending warrants (outside of the 5yr 5M at 2.80)

    8. exclusive rights

    9. excellent pipeline

    10. Newly partnered (Batelle for R&D)

    11. MAA approval soon

    12. New device new drug launch soon

    13. Mkt Cap 128 million ???

    At 3 times sales, this is already $400 million firm, and that is $10 PPS. DSCO === Hidden Gem.

  • Report this Comment On July 07, 2012, at 1:21 AM, lanceim59 wrote:

    Swift Energy (SFY) has a CAPS rating of 3 stars, not 4 stars you idiot.

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