There are plenty of strategies for picking stock winners: low P/E stocks, 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 able to beat the Street by finding undervalued stocks most investors have ignored.
But 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 were marked up by investors before their stocks began to move up over the past three months, in a market that has headed south in a dramatic fashion. My screen returned 152 stocks when I ran it, including these recent winners:
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Stock
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CAPS Rating, Dec. 16, 2008
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CAPS Rating,
March 16, 2009
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Trailing 13-Week Performance
|
|
i2 Technologies (Nasdaq: ITWO )
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**
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***
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47.8%
|
|
SunPower (Nasdaq: SPWRA )
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**
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***
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30.8%
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Symantec (Nasdaq: SYMC )
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**
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***
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19.8%
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Source: Motley Fool CAPS Screener; trailing performance from March 13 to June 12.
i2 Technologies, in fact, was previously picked featured here in January. So while this screen might tell us which stocks we should have looked at three months ago, we want the stocks 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, sporting valuations lower than the market's average, and whose price hasn't moved up over the past month by more than 10%.
Here are three stocks out of the 38 the screen returned that are still attractively priced, but which investors think are ready to run today!
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Stock
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CAPS Rating,
March 16, 2009
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CAPS Rating,
June 15, 2009
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Trailing 4-Week Performance
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P/E Ratio
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Banco Latinoamericano de Exportaciones (NYSE: BLX )
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**
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****
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(1.5%)
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8.3
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Penn Virginia (NYSE: PVA )
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**
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***
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7.4%
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7.5
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Wet Seal (Nasdaq: WTSLA )
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**
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***
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(4.0%)
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13.1
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Source: Motley Fool CAPS Screener; price return from May 15 to June 12.
Though the results you get may be different -- the data is dynamically updated in real time -- you can run your own version of this screen. For now, let's take a look at why investors might think these companies will go on to beat the market.
Banco Latinoamericano de Exportaciones
Latin American and Caribbean lending institution Bladex (as it is known) improved its Tier 1 capital ratio to 21.7% in the latest quarter. That move was based on the firm's belief that Latin America has yet to experience the full impact of the global slump. The added capital positions the bank to continue to profit from the long-term growth of the region. It also underscores the sentiments in this January pitch from CAPS All-Star Alex1453: "regional growth, full effects of CAFTA-DR soon to be felt, and don't forget the canal zone project."
Penn Virginia
In May, the oil and gas company Penn Virginia closed a follow-on offering of 3.5 million shares at $19 a pop. It's using the proceeds to pay down some of its line of credit, on which it had borrowed $390 million. Some CAPS members liked the firm at much higher prices, including All-Star aracer, who wrote last September: "Long term bet on Haynesville/Appalachia pipeline and processing at a good entry point."
Wet Seal
Last month, CAPS member jerseytix believed that teen retailer Wet Seal was leveling off. Two weeks ago, Wet Seal reported that May same-store sales ultimately fell less than expected (actual 8.4% vs expectations of 12.4%). Strong same-store sales growth at its Arden B chain offset lackluster performance at its namesake brand. Arden B's 11% same-store sales gain was overshadowed by the 19% boost in comps at rival Aeropostale (NYSE: ARO ) .
As Jerseytix wrote: "Seem to have stabilized, including growth at Arden B; guiding profitable for 1st quarter. Strong cash position, with a little improvement could see $8-$10 a share by 2010."
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. 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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