3 Stocks Ready to Roar

There are plenty of strategies for picking stock winners. You can focus on stocks with a low price-to-earnings ratio. You can seek out companies selling at a discount to their future cash flows. At the small-cap stock-picking service Motley Fool Hidden Gems, our analysts are able to stay ahead of the market by finding undervalued stocks that the market and investors have ignored.

But 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 they started taking off over the past three months, in a market that moved strongly higher before essentially trading sideways. My screen returned 166 stocks when I ran it, no doubt reflecting the market's continued recovery, and it included these recent winners:

Source: Motley Fool CAPS screener; trailing performance from June 12 to Sept. 11.

In fact, I picked DRDGOLD as a stock ready to run in May. So while this screen might tell us which stocks we should have looked at three months ago, we'd rather find 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 carry 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%.

Here are three stocks out of the 31 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 Aug. 14 to Sept. 11.

Although 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. Meanwhile, let's look at why investors might think these companies will go on to beat the market.

American Dairy
This curiously named company, a China-based maker of premium infant formula that sells its products only in that country, recorded an 85% increase in milk powder volume last quarter. That's significant because it accounts for more than three-quarters of the company's revenue. More than 93% of CAPS members rating the company think it will outperform the market, no doubt agreeing with EagleScoutEsq that China's "retail market is virtually untapped and has huge growth potential."

i2 Technologies
Earlier this year, supply-chain management company i2 Technologies was identified as a stock ready to surge ahead. And surge it did, by more than 150% so far this year. Even after that hot performance, this stock may be coming around for seconds. While earnings looked much worse compared to a year ago, last year's results included an $80 million net benefit from a settlement received from SAP (NYSE:SAP) over patent infringement. Some 90% of the CAPS members rating i2 expect it to continue moving forward.

Granite Construction
CAPS member nibs61sees Granite Construction benefiting from further spending of the stimulus program's money.

This company Granite Construction Inc. (Granite) is a heavy civil contractor and a construction materials producer. The Company is engaged in the construction of highways, dams, airport infrastructure, mass transit facilities, real estate site development and other infrastructure related projects. They will benefit as Obama spends more of our dollars on the Recovery Act. You see them building all over town and GVA will be there to get their fair share.

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.