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, even in this market 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 of Motley Fool CAPS, I screened for stocks that were marked up by investors before their stocks began to move up over the past three months in a market that moved strongly higher before essentially trading sideways. My screen returned 132 stocks when I ran it, no doubt reflecting the market's continued recovery, and included these recent winners:

Source: Motley Fool CAPS; trailing performance from July 24 to Oct. 19.

Buckle, in fact, was previously picked as a stock ready to run in July. 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 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 41 the screen returned that are still attractively priced but which investors think are ready to run today!

Source: Motley Fool CAPS; price return from Sept. 25 to Oct. 19.

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

Enzo Biochem
Diagnostic service biotech Enzo Biochem reported a widening fourth-quarter loss last week as it faced higher costs relating to a previous acquisition, accounting reviews, and a provision for uncollectable accounts receivable. Regardless of the losses, CAPS All-Star Boum thinks the stock is otherwise cheap: "They are building knowledge for future ... The stock is cheap, potential high and when other pharmaceutic company will have cash again ..."

Ecopetrol
Ecopetrol is Colombia's state-controlled oil producer that's benefited from an economy that hasn't suffered the effects of a recession as badly as other Latin American countries. Recovery may be just as weak, though, as the U.S. accounts for 56% of its exports, and Venezuela and Ecuador, both countries that were big manufacturing recipients, have imposed recent trade barriers. There's the possibility that Ecopetrol may ultimately lag, too.

Although boghead thinks it'll do well when oil prices run up higher, he believes Ecopetrol is currently overvalued.

Correct me if I am wrong, but it looks from their Q2 report that their net income is way down from last year. It also seems like their operating expenses are up. Given that their P/E ratio seems to be based off their year-end earnings in December of last year, it seems like they are way overvalued for the current year.

That being said, it looks like they are very well positioned to turn things around once the oil prices start climbing again.

Northeast Utilities System
Operating primarily in Connecticut, Massachusetts, and New Hampshire, Northeast Utilities has lagged the CAPS Electric Utilities sector over the past month as other Northeastern operators, like Central Vermont Public Service (NYSE:CV), have climbed higher.

Despite the recent one-month lag, according to DanielRY, the company is doing all the right things: "Is going [down] the right path in focusing on core competencies and divesting those business segments that don't fit."

Although only a relatively small number of CAPS members have rated the well-hidden utility company, 94% of them see it powering up with an outperform rating.

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 you think are starting to rev their engines.