3 Stocks Ready to Roar

There are plenty of strategies for picking winning stocks: low P/E stocks, companies selling at a discount to their future cash flows, and more. Even in this market, the analysts at the small-cap service Motley Fool Hidden Gems 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 Motley Fool CAPS investor intelligence database, I screened for stocks that investors had marked up before they began to move up over the past three months. My screen returned 154 stocks when I ran it, no doubt reflecting the market's recovery, and included these recent winners:

Source: Motley Fool CAPS Screener; trailing performance from May 15 to Aug. 14.

The Limited, in fact, was picked as a stock ready to run before. So while this screen might tell us which stocks we should have looked at three months ago, what we want are the stocks 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 28 the screen returned that are still attractively priced, but which investors think are ready to run today.

Source: Motley Fool CAPS Screener; price return from July 17 to Aug 14.

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. Let's take a look at why investors might think these companies will go on to beat the market.

New York Community Bancorp
Investors might have concerns about whether New York Community Bancorp can continue to be so generous with its dividend payment -- its payout ratio exceeds 100% -- but the regional bank is well-capitalized and it refused to participate in the TARP bailout. A plan to exchange shares of its common stock for $275 million of equity derivative securities to help bolster its financial position didn't sit well with the markets, but CAPS member GMeyers says it still holds traits that make it attractive.

Regional bank that is profitable, hasn't taken TARP funds & pays an extremely high & relatively safe dividend.

Family Dollar
Dollar stores should remain popular, particularly while consumers and the markets still wonder whether the recession is over. Family Dollar, 99 Cents Only (NYSE:NDN), and even privately held Dollar General ought to be able to meet the needs of those looking to stretch their, well, dollars.

CAPS member 1966boiler likes the company because:

in today's environment shoppers are very price aware, Family Dollar fills that void along with [Dollar General] and others.

CardioNet
Medical device maker CardioNet made investors take notice recently when it reported that Medicare reimbursements were going to be cut. Some analysts think the manufacturer of wireless heart-monitoring devices may need to restructure, but highly rated CAPS All-Star member TSIF still favors the company.

There are appeal processes for medicare reimbursements. If you have products not easily obtained then while you may not make an appreciable margin from the Federal Government, but you will/should be able to turn a profit. With increasing acceptance and need for their products, a volume increase should help offset some of the difference. I don't believe Cardionet is worth the $34 per share it was a year ago, but I do think they are worth more than the $6 they plummeted to today. Medicare may not have a heart, but I believe the beat will go on.

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've got to say about these or any other stocks that might be up-and-comers?