3 Stocks Ready to Roar

There are plenty of strategies for picking stock market winners: picking stocks with a low price-to-earnings ratio, focusing on companies selling at a discount to their future cash flows, and more. At the small-cap stock-picking service Motley Fool Hidden Gems, our analysts stay ahead of the market, even in the current environment, 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, to find the stocks whose engines are just getting warmed up?

Using the investor-intelligence database that is Motley Fool CAPS, I screened for investments that our members marked up before their stocks began to climb over the past three months, in a market that has slowly headed north. My screen returned 129 stocks when I ran it and included these recent winners:

Source: Motley Fool CAPS screener; trailing performance from April 3 to June 29.

Research In Motion, in fact, was previously picked as a stock ready to run and was featured in this column in March. 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 have just received a bump to three stars or better, that boast valuations lower than the market's average, and that sport a price that hasn't moved up over the past month by more than 10%.

Out of the 45 stocks the screen returned, here are three that are still attractively priced but that investors think are ready to run today:

Source: Motley Fool CAPS screener; price return from June 5 to June 29.

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

Revlon
On the heels of a big miss on earnings projections from Avon Products (NYSE:AVP), CAPS member dragracerdad thinks Revlon is doing the right thing to right-size its operation in a difficult economy. It's a move that dragracerdad believes will pay off in the future:

This stock dropped almost 17% today (5-28-09). The original report was 500 lost jobs. I just can't imagine people selling off their stock because the company is being responsible and trying to work within their means. Guess it's easy for me because I didn't lose a job there. But I'll be getting more if it doesn't rebound too quickly.

Safeway
Supermarkets that provide shoppers with value and selection have been benefiting from the recession. Kroger (NYSE:KR) is the grocery-chain low-cost leader, but Safeway has been a checkout star as well. Even so, highly rated CAPS All-Star member SideShowMel0329 sees it ceding ground over time: "They've still got good position in the industry, even though they're slowly being pushed out. Hold for no more than 1-2 years."

Solutia
The specialty-chemicals industry has melted in this market, and Solutia faced wider losses as a result. But cost-cutting measures, asset sales, and an equity offering should all work to reduce debt. CAPS member awallejr hopes it has emerged stronger from its past travails: "Bankruptcy [presumably] cleaned it up. Hopefully stimulus will move it forward."

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