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. The analysts at the small-cap-stock picking service Motley Fool Hidden Gems -- even in this market -- are beating the market by 10 percentage points by finding undervalued stocks that the market and investors have ignored.

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 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 eight stocks, which indicates how difficult a time it's been. It included these recent winners:

Source: Motley Fool CAPS Screener; trailing performance from Sept. 19 to Dec. 18.

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 just got bumped up to three stars or better, sport 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 15 the screen returned that are still attractively priced, but which investors think might be ready to run today!

Source: Motley Fool CAPS Screener; price performance from Nov. 21 to Dec. 18.

You can run your own version of the screen, although the results may be different than mine, because CAPS data is regularly updated. Let's take a look at why investors think these companies will go on to beat the market.

Crosstex Energy
Downward pricing pressure on natural gas is undoubtedly weighing on midstream natural gas provider Crosstex Energy. Even so, CAPS All-Star mateub figures that with a high-yielding dividend (at least when the pitch was written back in mid-November) shareholders will be able to ride out any storm:

Valuation already took a big hit after poor earnings, but management still believes they can pay their reduced dividend..we'll see. But at 17% yield (yes, really), I can afford further dividend cuts and still be ahead of this market. ... Indirectly, this is also my way of saying I think oil prices won't go much lower.

Innophos
Specialty phosphate maker Innophos has a 40% share of the North American market and, for most of its segments, there are only a few competitors, such as PotashCorp (NYSE:POT). The recent decline in Innophos' share price, however, has CAPS member basilisk333 thinking that the industry leader is once again attractively valued. From an early November pitch:

Innophos appears to have a near-monopoly on a product which is widely used in various consumer goods throughout the world. The company absolutely destroyed earnings expectations last quarter, sending shares skyrocketing. The recent market decline has brought a corresponding drop in the price of [Innophos] shares, making it once again an excellent buy.

Repsol
CAPS member emeraldbull thinks oil and gas specialist Repsol is subject to the vagaries of the market's manic mood swings, which may put it in position to begin a rebound:

It seems to me that this stock has a tendency to decline during a panic and then rebounds when things cool off. I think, but not too sure, it's time to buy. Only time can tell but I strongly feel this Energy company is a winner.

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.

By posting on CAPS, you can also help our Foolanthropy efforts to promote financial literacy. The Fool's "My 2 Cents" campaign will donate $0.02 for each message posted on any of our discussion boards, as well as for each CAPS pitch, during the month of December. 

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