The CAPS Screen: 5 Stocks Ready to Run

Warren Buffett made billions buying undervalued companies before market sentiment swung back in their favor. Legendary sandalwood bandit and handlebar-mustache-wearer extraordinaire Veerappan made his personal fortune by staying one step ahead of the law. And our Motley Fool Hidden Gems newsletter, headed by Fool co-founder Tom Gardner,  is currently beating the market by 18 points with its recommendations of small-cap companies that hadn't yet registered on Wall Street's radar -- like Nuance Communications (Nasdaq: NUAN  ) , up 144%

With these examples in mind, I used our new CAPS screening tool to find the stocks poised for big gains -- before Wall Street catches on.

These companies have:

  • Trailing three-year earnings growth of at least 10%.
  • Market capitalizations of at least $200 million and no more than $10 billion.
  • Four- or five-star ratings in CAPS, up from one, two, or three stars at the beginning of 2008.

Remember, in the first year for which we have data, newly-minted four-star stocks like Intuitive Surgical (Nasdaq: ISRG  ) (up 238% during that year) outperformed all other categories, yielding 41% on average.

Here are some of the companies I found:

Company

Share Price

Sector

Market Cap

Allscripts Healthcare Solutions (Nasdaq: MDRX  )

$13.17

Services

$745 million

Anthracite Capital (NYSE: AHR  )

$6.42

Financial

$454 million

Citizens Communications (NYSE: CZN  )

$11.50

Technology

$3.7 billion

Gushan Environmental Energy (NYSE: GU  )

$12.17

Basic Materials

$1 billion

Quicksilver Resources (NYSE: KWK  )

$33.90

Basic Materials

$5.4 billion

Data from Motley Fool CAPS and Yahoo! Finance as of July 16.

Come and join us on Motley Fool CAPS to dig into these companies further. Our 110,000-person-strong (and counting) CAPS community can help you stay a step ahead.

Or, if you'd like to check out the official list of Hidden Gems recommendations that have been crushing the market (along with our rationale for each pick), click here for a free 30-day trial.

For more CAPS content:

Bryan White does not own shares of any company mentioned in this article.  Nuance is a Motley Fool Hidden Gems recommendation. Intuitive Surgical is a Rule Breakers selection. Citizens is an Income Investor pick. The Motley Fool has the best disclosure policy in the biz.


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