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 the small-cap-stock picking service Motley Fool Hidden Gems, even in this market, analysts are beating the market by four percentage points 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 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 77 stocks when I ran it and included these recent winners:
|
Stock |
CAPS Rating 10/22/08 |
Trailing-13-week Performance |
|
|---|---|---|---|
|
ITT Educational Services |
** |
*** |
70.3% |
|
Steak 'n Shake |
** |
*** |
10.9% |
|
United Parcel Service |
** |
*** |
3.2% |
Source: Motley Fool CAPS Screener; trailing performance from Oct. 24 to Jan. 22.
While that tells us which stocks we perhaps should have looked at three months ago, what we want to see are 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 price hasn't moved up over the past month by more than 10%.
Here are three stocks out of the 61 that the screen returned that are still attractively priced but that investors think are ready to run today!
|
Stock |
CAPS Rating 10/22/08 |
CAPS Rating 01/22/09 |
Trailing-4-Week Performance |
P/E Ratio |
|---|---|---|---|---|
|
Raymond James Financial |
** |
*** |
(1.9%) |
8.8 |
|
Warren Resources |
** |
*** |
6.7% |
2.5 |
|
Xilinx |
** |
*** |
(5.0%) |
11.2 |
Source: Motley Fool CAPS Screener; price return from Dec. 26 to Jan. 22.
Though you may get different results since the data is dynamically updated in real time, you can run your own version of the screen. But let's take a look at why investors might think that these companies will go on to beat the market.
Raymond James Financial
Despite an economy that cut retail group commission revenue and put a big hurt on its underwriting business, Raymond James Financial was still able to report extraordinary profits because of favorable interest rate spreads due to government intervention, an outperforming real estate portfolio, and a growing loan portfolio. Back in October, CAPS member crepps thought it deserved praise because it managed to stay out of the hazardous financial soup that has stifled competitors like Citigroup
Solid financial services company with little-to-no exposure to the toxic assets plaguing the industry.
Warren Resources
CAPS member Dejeu thinks that oil and gas exploration concern Warren Resources will heat up again as the weather heats up:
As summer starts getting closer day by day, so will oil prices start to rise. Oil rises = more money for company high stock price.
Xilinx
CAPS member tcoppi summed up the bull case for tech specialist Xilinx simply last October:
Solid company, good products. Not much to go wrong.
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.
