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 stock-picking 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. (The market as a whole climbed sharply, then traded sideways, during that same period.) My screen returned 101 stocks when I ran it, no doubt reflecting the market's continued recovery, and included these recent winners:
|
Stock
|
CAPS Rating
(out of 5)
May 19
|
CAPS Rating Aug. 19
|
Trailing-
13-Week Performance
|
|
R.R. Donnelley & Sons (NYSE: RRD )
|
**
|
****
|
20.5%
|
|
Sunstone Hotel Investors
|
**
|
***
|
23.0%
|
|
Tenet Healthcare (NYSE: THC )
|
**
|
***
|
23.1%
|
Source: Motley Fool CAPS screener; trailing performance from Aug. 21 to Nov. 16.
Sunstone Hotel Investors, in fact, was previously picked as a stock ready to run. But 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 53 stocks the screen returned, here are three that are still attractively priced, but which investors think are ready to run today:
|
Stock
|
CAPS Rating
(out of 5) Aug. 9
|
CAPS Rating Nov. 9
|
Trailing-
4-Week Performance
|
P/E Ratio
|
|
Aeropostale (NYSE: ARO )
|
**
|
***
|
(19.6%)
|
12.7
|
|
Chemspec International (NYSE: CPC )
|
**
|
*****
|
(21%)
|
4.2
|
|
TCF Financial (NYSE: TCB )
|
**
|
***
|
(5.9%)
|
20.3
|
Source: Motley Fool CAPS screener; price return from Oct. 16 to Nov. 9.
You can run your own version of this screen; just remember that the data updates 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.
Aeropostale
Considering the consecutive string of disappointments that Abercrombie & Fitch (NYSE: ANF ) has served up to investors, it's hard to view Aeropostale's October comps numbers as even a one-time stumble. Same-store sales were up 3%, but analysts wanted more. The stock gave up ground as a result. CAPS All-Star huddaman thinks that aside from the fickle tastes of teens, Aeropostale is still one of the cool kids on the block:
they are doing great, very efficiently managed business, very profitable. only downside is, they could turn their sales growth negative anytime the target audience (teens) decide to jump ship. well, i feel the risk here is lot lower than at [Abercrombie] and [American Eagle Outfitters (NYSE: AEO ) ].
Chemspec International
Chinese specialty chemicals maker Chemspec International went public in June at $9 a share, but it wasn't long before it was trading around $7 a pop or less. The company wasted no time announcing a $15 million share buyback to prop up the stock, but shares are even lower since that announcement.
The CAPS community seems sold on Chemspec, however, with all but one of the members rating it thinking it will outperform the market. All-Star members are unanimous in their support, as is Wall Street.
TCF Financial
CAPS members aren't quite as stoked about regional bank TCF Financial -- only 78% think it will outperform -- and that causes Varchild2008 to wonder why much more sickly institutions get better investor love than this otherwise solid bank:
So yea... I am a bit TEED OFF and Disgruntled over this... I dumped Bank of Collapse [meaning Bank of America] after making a big profit on it in favor of TCF. Now TCF gets nothing while the complete disaster that is [Bank of America] gets a share price boost and a Hedge Fund buying millions of shares.
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. Join me there, or let us know what you think in the comments section below.
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?
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