3 Stocks Ready to Roar

There are plenty of strategies for picking stock winners: low P/Es, 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, the analysts are able to stay ahead of Wall Street by finding undervalued stocks that nearly everyone else has ignored.

Yet what if we could find a way to whittle down our list of prospects beforehand, to discover companies 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 rise over the past three months, even as the market headed south in a dramatic fashion. My screen returned 34 stocks, including these recent winners:

Source: Motley Fool CAPS Screener; trailing performance from Dec. 5 to Mar. 2.

Computer Sciences, previously spotlighted here back in January, has lived up to its promise so far. But while this screen might tell us which stocks we should have looked at three months ago, we really want the stocks that we ought to be looking at today. I went back to the screener in search of stocks that were just bumped up to three stars or better; sported valuations lower than the market's average; and hadn't increased in price by more than 10% in the past month.

Of the 53 stocks the screen returned, these three are still attractively priced, but enjoy a solid dose of investor confidence:

Source: Motley Fool CAPS Screener; price return from Feb. 6 to Mar. 2.

You can run this screen yourself, though the results you get may be different, since the data is dynamically updated in real time. For now, let's examine why investors might think these companies will go on to beat the market.

Research In Motion
Sales of smartphones accounted for 23% of all wireless handset sales in the fourth quarter, nearly doubling the 12% they represented a year ago. Among touchscreen devices, Apple (NASDAQ:AAPL) led the pack, while Research In Motion's BlackBerry Storm also helped the smartphone segment account for 20% of all the mobile phones sold in North America in 2008. CAPS member gokylego finds the BlackBerry a better option for most consumers:

[Research In Motion] will always be a substitute to the iPhone. I see [Research In Motion] having the upper hand because they offer smartphones on multiple US carriers. [Research In Motion] will continue to offer devices geared toward the professional crowd and ... will be the primary competitor for the iPhone.

Live Nation
With its merger to Ticketmaster under consideration, CAPS member pslorenz hopes Live Nation turns into a big crowd-pleaser, despite the losses it just posted: "People still seek to be entertaned. With or without a Ticket Master merger, this should still be profitable, especially at this low price."

Total System Services
Processing credit card payments remains a lucrative business for Total System Services. In January, the company reported a 45% jump in fourth-quarter profit on the strength of global sales. While the dollar's recovery hid that resilience, Total System Services' international exposure helped attract CAPS member SoEzWayInvestor last September:

The economy is cyclical and will eventually improve, people will start to use credit and debit cards more often which = more revenue for [Total System Services]. They have some exposure to China wich is just starting to use credit cards.

[Total System Services] has really good stats and the PE is trading at a discount to it's 5 year historical PE range. The last 5 years have seen good ROE, ROC, and growing FCF.

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? Let us hear what you've got to say about these or any other stocks that might be starting to rev their engines.