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 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 investor-intelligence database at Motley Fool CAPS, I screened for stocks investors had marked up before they began to move up over the past three months in a market that moved sharply higher before essentially trading sideways. My screen returned 161 stocks when I ran it, no doubt reflecting the market's continued recovery, and included these recent winners:

Source: Motley Fool CAPS screener; trailing performance from July 10 to Oct. 6.

Fresh Del Monte Produce, in fact, was picked 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, 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 were recently bumped up to three stars or better in CAPS, sport valuations lower than the market's average, and whose prices haven't moved up by more than 10% over the past month.

Here are three stocks of the 38 the screen returned that are still attractively priced but might be ready to run.

Source: Motley Fool CAPS Screener; price return from Sept. 11 to Oct. 6.

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

Compuware
CAPS member kahunacfa likens Compuware's software offerings to a frosty beer.

Compuware provides tools to improve software application productivity improvements for information processing installations. Improved efficiency and lower costs - a Great combination sort of like "[Tastes] Great, Less Filling!" How can that lose?

Compuware's announcement today that it is purchasing Web-software developer Gomez tucks in nicely to its enterprise software and performance management products. I'll drink to that, even if it takes out Gomez's long-awaited IPO.

Invacare
Wheelchairs, portable oxygen systems, and specialized beds don't have the cachet of products from other medical device companies. But Invacare managed to surprise the four analysts covering the company by reporting earnings that beat their estimates by 50%, making it the company's fourth consecutive earnings surprise. That could be why CAPS member adorin views Invacare as an "emerging health care play."

Reed Elsevier
The LexisNexis database is arguably one of the world's most recognized archives of periodicals and legal documents, yet parent company Reed Elsevier operates in relative obscurity. In a time when other media companies are openly questioned about their viability, Reed Elsevier has proven to be successful, similar to Thomson Reuters (NYSE:TRI).

Although only a small number of CAPS members have rated the well-hidden Reed Elsevier, 90% of them see it making headline news with an outperform rating. More than a year ago, Rexington suggested that its subscription-based model would continue to drive it.

Elsevier's evil, but it's got a great business model: everybody pays to access its journal information. As long as it keeps getting away with this, it'll do well.

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.