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 60 stocks when I ran it, no doubt reflecting the market's continued recovery during that time, and included these recent winners:
|
Stock
|
CAPS Rating 12/24/09
|
CAPS Rating 3/24/10
|
Trailing 13-Week
Performance
|
|
Merge Health care
|
**
|
***
|
40.4%
|
|
Lihir Gold
|
**
|
***
|
37.4%
|
|
Vascular Solutions (Nasdaq: VASC )
|
**
|
***
|
42.4%
|
Source: Motley Fool CAPS Screener; trailing performance from April 1 to June 25.
Vascular Solutions, in fact, was previously picked as a stock ready to run a year ago. 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 68 stocks the screen returned, here are three that are still attractively priced, but which investors think are ready to run today:
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Stock
|
CAPS Rating 3/22/09
|
CAPS Rating 6/21/10
|
Trailing 4-Week Performance
|
P/E Ratio
|
|
MDU Resources (NYSE: MDU )
|
**
|
***
|
(0.2%)
|
13.1
|
|
Par Pharmaceuticals (NYSE: PRX )
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**
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***
|
(3.5%)
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10.6
|
|
Temple-Inland (NYSE: TIN )
|
**
|
***
|
3.3%
|
14.4
|
Source: Motley Fool CAPS Screener; price return from May 28 to June 25.
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.
MDU Resources
At times it might seem like energy, mining, and construction services firm MDU Resources is working at cross purposes to its own betterment. While its regulated utilities saw record profit due to higher oil prices and lower costs -- similar to the impact on its pipeline and energy services segment -- the construction business posted a wider $20 million loss because of the malaise in the building industry. That malaise is corroborated by gypsum board maker USG (NYSE: USG ) , whose shares are off 45% from recent highs due to a weak housing market.
MDU missed analyst expectations for the quarter, but 95% of the CAPS members rating the diversified services firm believe it will still go on to outperform the broad market averages. Expend a little energy and leave your outlook on the MDU Resources CAPS page.
Par Pharmaceuticals
After just appearing here as a stock that was previously found to be a runner, generic drugmaker Par Pharmaceuticals is back, but this time as one that looks like it's poised to take off again. It makes the authorized generic version of Toprol XL, an AstraZeneca (NYSE: AZN ) treatment for angina, high-blood pressure, and heart failure. Sales for the drug rose 12% in the first quarter and a number of its therapies found traction, helping to boost Par's profit by 64%.
Earlier this year CAPS member Moszis said it was Par's "fundamentals" that were attractive, while 85% of the almost 200 members rating it also marked outperform. Give us more than your own generic view of its future on the Par Pharmaceuticals CAPS page.
Temple-Inland
Analysts point to declining newspaper and magazine subscription rates as part of the reason that paper products companies like Temple-Inland and International Paper will find their profits buffeted. spotpetes felt the economy was going to turn up sooner rather than later back in January when this CAPS member indicated Temple-Inland would outperform -- which turned out to be a good call at the time. The stock has rallied 37% from its 2010 lows in early February, but now with more economists expecting a double-dip recession, slip us a note on the Temple-Inland CAPS page whether you think the stock is now headed for the waste paper basket.
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.
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