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 47 stocks when I ran it, no doubt reflecting the market's turmoil during that time, and included these recent winners:
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Stock
|
CAPS Rating 2/3/10
|
CAPS Rating 5/3/10
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Trailing 13-Week Performance
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|
Coca-Cola Enterprises (NYSE: CCE )
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**
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***
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12.2%
|
|
Banco Macro
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**
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***
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35.6%
|
|
Corpbanca
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**
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****
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55.2%
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Source: Motley Fool CAPS Screener; trailing performance from May 7 to Aug. 2.
Coca-Cola Enterprises, in fact, was previously picked as a stock ready to run in March. 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 40 stocks the screen returned, here are three that are still attractively priced, but that investors think are ready to run today:
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Stock
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CAPS Rating 5/3/09
|
CAPS Rating 8/2/10
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Trailing 4-Week Performance
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PE Ratio
|
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Aon (NYSE: AON )
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**
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***
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(0.5%)
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16.7
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Collectors Universe (Nasdaq: CLCT )
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**
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***
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(1.7%)
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18.7
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Global Cash Access (NYSE: GCA )
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**
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***
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(39.6%)
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9.3
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Source: Motley Fool CAPS Screener; price return from July 9 to Aug. 2.
You can run your own version of this screen over on CAPS; just remember that the data's 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.
Aon
Just last week Aon's much smaller industry rival National Financial Partners (NYSE: NFP ) appeared here as a stock awaiting liftoff, suggesting insurance and risk management was a sector that was poised to deliver outstanding returns. With adjusted earnings beating the analyst consensus, Aon looks to continue its acquisition spree to lift revenues further.
CAPS member TepperJason is looking long term at Aon, joining with the 84% of CAPS members rating the financial services firm expecting it to outperform the broad market averages.
Collectors Universe
Although Collectors Universe showed signs that it might be in financial trouble last year, but the 25% jump in the value of gold undoubtedly helped fuel the need for its grading and authentification services. Over the past nine months, for instance, it processed 20% more coins than the year before. With the advent of eBay (Nasdaq: EBAY ) making collectibles a more viable business, Collectors Universe should do well -- particularly as gold gains traction again.
CAPS member soth12 says Collectors Universe paying you a handsome dividend while you wait for that growth is once of its attractions:
A good service company that is still small with plenty of room to grow. The company also pays a really nice dividend.
Global Cash Access
It's rarely ever a one-to-one ratio, by the loss of Harrah's as a customer seems to have unfairly crushed Global Cash Access's stock. The casino operator accounted for 14% of Global's revenues in 2009, and while substantial, doesn't seem to justify the loss of half of the ATM and cash access specialist's market cap. Harrah's has represented a declining percentage of total revenues for several years now.
Rival Global Payments (NYSE: GPN ) got overdrawn on its account, too, as its shares were sunk by guidance that was below Wall Street expectations.
drinkmorebeer96 agrees the markets have overreacted to Global Cash's announcement, as does CAPS All-Star jed71:
A 14% reduction in sales due to a lost contract with Harrah's results in a 50% market cap reduction? Seems quite over done...Falling knife, where are you? OH - THERE YOU ARE!!!
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 box below whether you think these or any other stocks are starting to rev their engines.
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