3 Stocks Ready to Roar

There are plenty of strategies for picking stock winners: focusing on low price-to-earnings ratios, selecting 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 get a leg up 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, and find those whose engines are just getting warmed up?

Using the investor-intelligence database of Motley Fool CAPS, I screened for stocks that investors marked up before their stocks began to climb over the past three months, in a market that moved strongly higher before essentially trading sideways. My screen returned 119 stocks when I ran it and included these recent winners:

Source: Motley Fool CAPS Screener; trailing performance from April 24 to July 20.

Hospitality Properties, in fact, was previously picked as a stock ready to run, and was featured here in April. So while this screen might tell us which stocks we should have looked at three months ago, we want 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 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 26 the screen returned that are still attractively priced, and which investors think are ready to run.

Source: Motley Fool CAPS Screener; price return from June 26 to July 20.

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

Ameren
Utilities were long considered "widows and orphans" stocks because of their steady revenue streams and relative safety. A lot has changed since then, but rate-regulated utilities such as Ameren and Alliant Energy (NYSE:LNT) sport valuations well below the market. All-Star CAPS Member Caligiuri has several reasons for liking Ameren: "Considering Book value, earnings, and market cap ... this should beat the market in 5 years"

Global Partners
Refined-petroleum-products distributor Global Partners reported strong earnings in the first quarter. Gross profit rose by 42% on a 5% increase in volume, even though overall revenue fell because of lower refined-petroleum prices. A diverse product base, effective margin management, and a favorable forward pricing market have helped net income climb by 120% over last year's results. Earnings of $1.40 per share far exceeded analysts' expectations of just $0.81. Global Partners also pays a dividend yielding more than 10% these days.

Sappi
Sappi is a South African paper maker that has been beset by weak global conditions and recent union strikes in Johannesburg. It expects its second-quarter operating loss to match what it reported in the quarter that ended in March. However, the company expects coated-paper demand to recover somewhat in the months ahead, and for inventory depletion in its customer supply chain to retract. With the added bonuses of a new syndicated revolving credit facility and a new secured term loan, Sappi expects to generate positive net cash flow in the quarter that ends in September.

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.