3 Stocks Ready to Roar

There are plenty of strategies for picking stock winners: low P/E stocks, companies that are selling at a discount to their future cash flows, and more. At the small cap stock picking service Motley Fool Hidden Gems, the analysts are beating the market by 22 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 were marked up by investors before their stocks began a run up of 20% or more over the past three months. That underscores the research suggesting that CAPS' highest-rated stocks performed best, while its lowest-rated companies fared worst.

My screen returned some 28 stocks when I ran it, including these recent winners:

Source: Motley Fool CAPS Screener; price change from June 13 close to Sept. 8 close.

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 got bumped up to three stars or better over the past three months, sport valuations lower than the market's average, and have prices that haven't moved up over the past month by more than 10%.

Here are three stocks that are still attractively priced, but which investors think are ready to run today:

Source: Motley Fool CAPS Screener; price return from Aug. 15 close to Sept. 8 close.

Let's take a look at why investors think some of these companies will go on to beat the market.

Affymetrix
The biochip battle between Affymetrix and Illumina (NASDAQ:ILMN) has produced a winner in the latter. That's allowed Illumina to go for a cash grab by doing a secondary offering, and it also just announced investor approval for the authorized share count increase to let a 2-for-1 stock split proceed. Yet CAPS member gDaemon figures Rule Breakers recommendation Affymetrix's portfolio, market share, and other factors ought to keep it going.

I think this peak in [Illumina] and troth in [Affymetrix] was an over-reaction to rather dramatic quarterly drama. [Illumina] won this season, but [Affymetrix] still has market share, an interesting IP portfolio and access to high opportunity markets. Theoretically, their remaining niches/shares of the market, increasing global presence and improved operating efficiency, should allow for some mild revenue and earnings growth over the next four quarters. Keep an eye on the legal meter.

Royal Caribbean Cruises
Weakening economies worldwide and high oil prices ought to put a luxury entertainment provider like Royal Caribbean Cruises in the dry dock, but other than a shortfall at its Spanish affiliate, the Motley Fool Stock Advisor selection says that its bookings are holding up well. Coupled with cost-saving measures that the cruise ship operator is implementing, the decline in fuel costs ought to help stave off any floundering. CAPS member FGunawan finds reduced downside risk as oil prices fall.

[Royal Carribean] is a much wiser bet on declining oil prices than airline stocks. Low valuations imply limited downside risk, at the same time offering significant upside potential. Declining oil prices will add fuel to this stock's rise.

Whirlpool
It's Whirlpool's ability to not only integrate the Maytag line with its own, but to expand sales overseas that has top-rated CAPS All-Star JereBear1 predicting it will clean up when the U.S. economy turns around.

[Whirlpool] is a stable, well run company which has successfully added the Maytag line to its impressive list of brands. Material costs and energy are compressing their profit margins some this year, but margins should rebound by next year. They are raising prices to compensate. North America sales are down with housing starts, but the fast growing sales levels in Asia are compensating for the most part (overall sales are still growing). As the market returns here in North America, the componding effect on growth should be rewarding to investors.

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.