3 Stocks Ready to Roar

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 our small-cap stock-picking service, Motley Fool Hidden Gems, our analysts are beating Wall Street by nine percentage points -- even in this market! -- by finding undervalued stocks that the market and 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 prices began to rise over the past three months, even as the rest of the market slid dramatically. The results underscore the research suggesting that CAPS' highest-rated stocks performed best, while its lowest-rated companies fared worst.

My screen returned 15 stocks when I ran it, including these recent winners:

Source: Motley Fool CAPS Screener; trailing performance from Aug. 8 to Nov. 6.

While that tells us which stocks we perhaps should have looked at three months ago, we'd rather have 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 whose prices haven't risen by more than 10% over the past month.

Here are three stocks out of the 45 the screen returned that are still attractively priced, but which investors think are ready to run today!

Source: Motley Fool CAPS Screener; price return from Oct. 10 to Nov. 6.

Let's see why investors might think some of these companies will go on to beat the market.

Fidelity National Information Services
On the surface, it looks like Fidelity National had a rough third quarter. Net income fell more than 80% from year-ago levels. But when you back out one-time items from last year's results, the credit card technology-services company not only beat its year-ago profit results, but also analyst expectations. That undoubtedly owes to the corporate restructuring Fidelity is engineering, as CAPS member OutstandingOdds saw back in April:

Corporate restructuring should unlock significant value here...a spin-off of the LPS segment in mid 2008 should provide the catalyst, as the two segments are likely to receive higher valuations as independent pure plays rather than a combined entity. Investors purchasing around today's price should significantly outperform the broad market averages over the next 2-3yrs

Mesabi Trust
Like Macquarie Infrastructure (NYSE:MIC), Mesabi Trust owns cash-generating assets and distributes much of the income to its investors through dividends. Whereas Macquarie provides airport services, along with gas production and distribution, Mesabi owns iron ore mines.

Mesabi's high yield -- currently 45% -- looked good last month to CAPS member technerd, who argues that investors can sit back and collect the dividend while awaiting a commodity-price recovery: "Collect the good yield and this trust will come with slight recovery in commodities prices."

Sinclair Broadcast Group
Sinclair Broadcast is another company with a high dividend yield -- more than 25%. That juicy payout attracted CAPS member WPThatcher: "Very cheap stock with a lot of insider buying. The yield is astronomical."

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?