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. At the small-cap stock-picking service Motley Fool Hidden Gems, the analysts are able to stay ahead even in this 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 Motley Fool CAPS, I screened for stocks that were marked up by investors before they began to move up over the past three months in a market that has headed south in a dramatic fashion over the past year. My screen returned 124 stocks when I ran it and included these recent winners:

Source: Motley Fool CAPS Screener; trailing performance from Feb. 20 to May 19.

World Fuel Services was, in fact, picked as a stock ready to run in February. 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 had just been bumped up to three stars or better, sport valuations lower than the market's average, and whose price hasn't moved up by more than 10% over the past month.

Here are three stocks out of the 38 the screen returned that are still attractively priced but that some investors think are ready to run today.

Source: Motley Fool CAPS Screener; price return from April 24 to May 19.

Though the results you get may be different because the data is dynamically updated in real time, you can run your own version of this screen. But let's take a look at why investors might think these companies will go on to beat the market.

Assurant
Specialty insurance provider Assurant is confident enough that it recently raised its dividend 7% to $0.15 per share. With 92% of the CAPS members rating it believing it will outperform the market, they're undoubtedly as confident as management is in its ability to generate cash flow through its diversified portfolio.

Central Vermont Public Service
It's not surprising to learn that Central Vermont Public Service operates a program to generate electricity from cow manure. Yet with only $347 million in annual revenues, it's a far more low-profile utility than a big-state power generation company like Consolidated Edison (NYSE:ED), which helps explain why only a few dozen CAPS members have rated the company. Head over to CAPS and let us know how you feel about Central Vermont Public Service.

K12
We have another company that's below the radar -- K12, which provides curriculums for kindergarten through 12th grades and education services delivered via the Internet. This month, it reported that earnings for its third quarter rose 44% to $3.5 million on 38% growth in revenues. In September, at the start of the market's meltdown, CAPS member UniqueMiner was excited about its programs, which are free to students in 27 states.

I am a consumer of the LRN product and I couldn't run fast enough. If I had it to do all over again, I would break my neck to get here faster. Why? The price is right! The LRN product is paid for by (get this) the state. All I have to do is sign for the UPS packages that come to my door. Nice. Gotta love that business model.

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 have to say about these or any other stocks that you think are starting to rev their engines.