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. Even in this market, the analysts at our small-cap stock-picking service Motley Fool Hidden Gems are beating Wall Street by six points on average, finding undervalued stocks ignored by pros and investors alike.
Yet what if we could find a way to whittle down our list of prospects beforehand, to locate 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. That underscores the research suggesting that CAPS' highest-rated stocks performed best, while its lowest-rated companies fared worst.
My screen returned just 8 stocks when I ran it, which suggests how difficult a time it's been. The results included these recent winners:
|
Stock |
CAPS Rating 9/11/08 |
Trailing 13-week Performance | |
|---|---|---|---|
|
Panera Bread (NASDAQ:PNRA) |
** |
*** |
1.3% |
|
Wausau Paper (NYSE:WPP) |
** |
*** |
3.6% |
|
Valeant Pharmaceuticals (NYSE:VRX) |
** |
*** |
6.9% |
Source: Motley Fool CAPS Screener; trailing performance from Sept. 12 to Dec 11.
While that tells us which stocks we perhaps should have looked at three months ago, we really want the stocks we ought to be looking at today. So I went back to the screener and looked for stocks with ratings recently risen to three stars or better, valuations lower than the market's average, and prices that haven't increased more than 10% in the past month.
Of the 37 stocks the screen returned, here are three attractively priced candidates:
|
Stock |
CAPS Rating 09/11/08 |
CAPS Rating 12/11/08 |
Trailing 4-Week Performance |
PE Ratio |
|---|---|---|---|---|
|
Canadian Solar (NASDAQ:CSIQ) |
** |
*** |
(14.2%) |
3.7 |
|
Continental Resources (NYSE:CLR) |
** |
**** |
(10.3%) |
8.9 |
|
HealthNet (NYSE:HNT) |
** |
*** |
9.0% |
6.5 |
Source: Motley Fool CAPS Screener; price return from Nov. 14 to Dec. 11.
Let's see why CAPS investors might believe in these companies' chances of beating the market.
Canadian Solar
While some signs suggest that the solar industry is flaming out, CAPS member cfackler likes Canadian Solar's geographically diversified customer base:
I like how this company provides solar power solutions beyond residential and commercial panels. Reading the company description, I imagine they make the types of panels sitting on top of temporary road hazard signs and other mobile solar power solutions. I also like their customer base outside of the solar backward US. I'm ignoring some gloomy numbers on the key statistics page over at Yahoo Finance.
Continental Resources
Oil and gas exploration & production outfits Continental Resources and EOG Resources (NYSE:EOG), both Bakken-shale plays, have gotten burned by tumbling energy prices. However, CAPS member kkconway finds the depressed prices an attractive opportunity to get in on a temporary situation: "Buy while it's cheap. Oil will be in demand again sooner than later."
HealthNet
CAPS All-Star alvojiggy1 thinks the turmoil surrounding HealthNet indicates that the company will underperform the market:
high debt bad forward earnings. I love the stock market. People spend a lot of energy trying to get a company to work...so sad.
Three for free
It pays to start your own research on these stocks on Motley Fool CAPS, absolutely free. 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 over to CAPS and share your opinions on these or any other stocks that might be revving their engines.
