3 Stocks Ready to Roar

There are plenty of strategies for picking stock winners: stocks with a low price-to-earnings ratio, companies selling at a discount to their future cash flows, and more. At the small-cap stock-picking service Motley Fool Hidden Gems, even in this market the analysts are beating the market by 10 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 investors marked up before their stocks began to move up over the past three months, in a market that has headed south in a dramatic fashion. That underscores the research suggesting that CAPS' highest-rated stocks performed best, while its lowest-rated companies fared worst.

My screen returned just 89 stocks when I ran it and included these recent winners:

Source: Motley Fool CAPS Screener; trailing performance from Oct. 10 to Jan. 8.

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

Here are three stocks out of the 23 the screen returned that are still attractively priced but that investors think are ready to run today!

Source: Motley Fool CAPS Screener; price return from Dec. 12 to Jan. 8.

Though the results you get may be different since the data are always updated, you can run your own version of the screen. But let's look at why investors might think some of these companies will go on to beat the market.

i2 Technologies
December was a rough month for supply-chain management specialist i2 Technologies, which saw its merger bid with JDA Software (NASDAQ:JDAS) fall apart, followed by the resignation of its CEO. CAPS All-Star tenmiles, who sports a perfect 100.00 rating, finds the lower price as a result of the events a tempting buying opportunity: "Buying small cap [i2 Technologies] following its decline due to the failed merger (will pick up $20 million fee). Company has some management issues, including past income recognition issues, but overall looks cheap at $6.49 given strong balance sheet and client profile."

Omnicom
As the publishing industry continues to wither, advertising and marketing agency owner Omnicom is feeling the pressure, too, and is resorting to layoffs to cut costs. CAPS member lowellfield found the uncertainty surrounding Detroit's automakers reason enough to hold off on an Omnicom bid: "Don't think estimates have come down enough, given uncertainty with the Big Three and likely cuts to marketing spend generally. Think its "real" forward multiple is more like 12x which isn't low enough in this environment."

Parallel Petroleum
CAPS All-Star 19yisroel88 thinks Parallel Petroleum will be a slick trick when the price of oil bounces back: "[O]il will have its day back and when that day comes we will be leading the charge forward."

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. Head on over to the completely free CAPS service, and let us hear what you have to say about these or any other stocks that you think are starting to rev their engines.

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