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 145 stocks when I ran it, no doubt reflecting the market's continued recovery, and included these recent winners:
|
Stock |
CAPS Rating 1/12/10 |
Trailing 13-Week Performance^ |
|
|---|---|---|---|
|
Citigroup |
** |
*** |
35.1% |
|
JPMorgan Chase |
** |
*** |
5.1% |
|
Netflix |
** |
*** |
69.5% |
Source: Motley Fool CAPS screener.
^From Jan. 15 to April 13.
JPMorgan Chase, in fact, was picked as a stock ready to run in February. 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 42 stocks the screen returned, here are three that are still attractively priced, but which investors think are ready to run today:
|
Stock |
CAPS Rating 1/12/09 |
CAPS Rating 4/12/10 |
Trailing 4-Week Performance^ |
P/E Ratio |
|---|---|---|---|---|
|
City Telecom |
** |
*** |
6.6% |
19.3 |
|
LaBarge |
** |
**** |
(3.3%) |
14.8 |
|
Guess? |
** |
*** |
0.1% |
18.0 |
Source: Motley Fool CAPS screener.
^From March 19 to April 13.
P/E = price-to-earnings.
You can run your own version of this screen over on CAPS; just remember that the data's 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.
City Telecom
City Telecom is a small-cap stock with big-cap dreams. While it reportedly controls just 5% of Hong Kong's IP service provider market, it hopes to parlay that stake into becoming one of the industry's biggest players, just as it has in broadband. Reports say City Telecom is No. 2, controlling almost 20% of the field. Stock guru Jim Cramer likens it to Qwest Communications
LaBarge
It might sound like a 1980s pop Motown group, but LaBarge is a serious electronics manufacturer to industries including defense, where it recently won a $1 million contract to make circuit card assemblies for BAE Systems' missile warning systems. Before that it won a $19 million contract from United Technologies
Ninety percent of the CAPS members who have rated the electronics specialist believe it will beat the broad market averages. Now that's music to any investor's ears.
Guess?
When even Abercrombie & Fitch
At least for the near term teen spending is making a resurgence, and [Guess?] is always a quality focused and polished brand of staples for the teen-twenties wardrobe.
The fourth-quarter gains that Guess? reported last month showed marked improvement, with sales up more than14% and adjusted profits rising by 45%. Comps in the quarter were up a healthy 5% from the year-ago period, contributing to the record quarter, and the company has turned into a veritable cash-generating machine.
Head on over to the Guess? CAPS page and let us know whether it's worth guessing when the music will stop.
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, or let us know in the comments section below whether you think these or any other stocks are starting to rev their engines.
