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, the analysts are able to stay ahead of the market 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 to move up over the past three months in a market that has headed south in a dramatic fashion. My screen returned 107 stocks when I ran it and included these recent winners:


CAPS Rating, 8/24/08

CAPS Rating, 11/24/08


13-Week Performance

Advanced Micro Devices (NYSE:AMD)




Navistar (NYSE:NAV)








Source: Motley Fool CAPS Screener; trailing performance from Nov. 21 to Feb. 20.

Navistar was previously picked as a stock ready to run back in November. So while this screen might tell us which stocks we should have looked at three months ago, what we want are the stocks that we ought to be looking at today. I went back to the screener and looked for stocks that were just bumped up to three stars or better, that sported 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 51 the screen returned that are still attractively priced, but which investors think are ready to run today!


CAPS Rating, 11/21/08

CAPS Rating, 2/23/09


4-Week Performance

P/E Ratio

Alliance Data Systems (NYSE:ADS)





Overseas Shipping (NYSE:OSG)





Paragon Shipping (NASDAQ:PRGN)





Source: Motley Fool CAPS Screener; price return from Jan. 23 to Feb. 20.

You can run your own version of the screen (although the results you get may be different, since the data is dynamically updated in real time). Let's take a look at why investors might think these companies will go on to beat the market.

Alliance Data Systems
When you open a charge account at a retail store, it's often not the company that provides marketing, credit, and transaction services -- rather, it’s Alliance Data Systems. Considering its strong national accounts spread across various companies like Bank of America (NYSE:BAC), CAPS member catbert234 finds ADS' ability to diversify away from credit card processing to be a liberating endeavor:

ADS has expanded and diversified its business over the past 5 years so that more than its revenues come from services / products that do not depend on credit card issuance and transaction processing and that are not impacted by consumer risk. As such, the company isn't a pure credit play and that should be taken into account when analyzing the stock. Based on historical performance and continued guidance, I still believe that this ... stock has not lost its ability to deliver earnings as a mid-cap growth stock on its way to Fortune 100 positioning.

Overseas Shipping
Although analysts are expecting a drop in demand for crude oil tankers such as those supplied by Overseas Shipping, charter rates have been better than expected in the first quarter. CAPS member Jonock says that as long as oil is a primary source for fuel, it's going to need to be shipped here: "As long as we burn oil, it will be shipped to USA."

Paragon Shipping
Dry bulk shipper Paragon Shipping faces a different situation than Overseas in that dry bulk rates have fallen precipitously, but it's planning to use the depressed prices to make timely acquisitions. bbincc finds the only thing missing from the equation is an economic recovery:

[Greek] shipping concern with recent flurry of bulk carrier acquisitions with more in the works. Books/balance look positive. Just add recovery.

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. 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.

Try any of our Foolish newsletters today, free for 30 days.

Fool contributor Rich Duprey does not have a financial position in any of the stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.