3 Stocks Ready to Roar

There are plenty of strategies for picking stock winners: low P/E stocks, companies that are discounted to their cash flows, and more. At the small-cap stock-picking service Motley Fool Hidden Gems, the analysts are beating the market by 20 percentage points by finding undervalued stocks that the market and investors have ignored.

Yet what if we could find a way to whittle down our list of prospects beforehand, finding those whose engines are just getting warmed up?

Using the investor-intelligence database of Motley Fool CAPS, I screened for stocks that were marked up by investors before their stocks began a run-up of 20% or more over the past three months. That underscores the research suggesting that CAPS' highest-rated stocks performed best, while its lowest-rated companies fared worst.

My screen returned some 19 stocks, including these recent winners:

Source: Motley Fool CAPS Screener; price return from May 23 close to Aug. 20 close.

While that tells us which stocks we perhaps should have looked at three months ago, we want the stocks that we ought to be looking at today. So I went back to the screener and looked for stocks that just jumped up to three stars or better, sport valuations lower than the market's average, and whose price hasn't moved up over the past month by more than 10%.

Here are three stocks out of the 20 the screen returned that are still attractively priced, but which investors think are ready to run today!

Source: Motley Fool CAPS Screener; price return from July 25 close to Aug. 20 close.

Let's take a look at why investors think some of these companies will go on to beat the market.

Life Time Fitness
Fitness club chain Life Time Fitness was able to score earnings results in the second quarter by attracting a 12% increase in members. Earnings met expectations of $0.50 a share -- a 13% jump over last year.

CAPS All-Star member berkybucks issued his own assessment back in May:

Increasing awareness/demand to be fit. Expects 19-22% revenue growth and 21-23% earnings growth. Currently lagging S&P, below 50 day average.

Although Life Time continues to lag a bit, it has committed to a more aggressive expansion strategy than rival New York Sports Club operator Town Sports International (NASDAQ:CLUB), which hasn't fared any better.

DSW
CAPS member ArtVandalay11 pointed out back in April that shoe retailer DSW would be tied up in knots as a result of the high cost of gas and consumer goods. With customers buying only the essentials, the prediction of a drawn-out decline seemed likely:

With the retail industry currently crippled in America, and not much sign of the economy turning around due to high prices in gas and good, there doesn't seem to be much hope for this shoe retailer as it should continue on its year long trend in the red.

However, like Foot Locker (NYSE:FL), which beat earnings expectations this quarter, DSW has reaffirmed its own fiscal-year profit forecast even with disappointing same-store sales in July.

Three for free
It pays to start your own research on these stocks on Motley Fool CAPS. Read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made, all from a stock's CAPS page. Why not head over to the completely free CAPS service and let us hear what you've got to say about these or any other stocks that you think are starting to rev their engines.