3 Stocks Ready to Roar

There are plenty of strategies for picking stock winners, from finding low P/E stocks to seeking companies selling at a discount to their future cash flows. At the small-cap stock-picking service Motley Fool Hidden Gems, even in this market, the analysts are able to stay ahead of the pack by finding undervalued stocks that Wall Street and investors have ignored.

But what if we could whittle down our list of prospects beforehand to find those whose engines are just getting warmed up?

Using our investor intelligence database at Motley Fool CAPS, I screened for stocks that were marked up by investors before their share prices rose over the past three months. My screen returned 116 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 Sept. 25 to Dec. 24.

Health Net, in fact, was previously picked as a stock ready to run just this past September. But 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 sport valuations lower than the market's average, and that haven't appreciated by more than 10% in the past month.

Of the 30 stocks the screen returned, here are three that are still attractively priced, but which investors think are ready to run today:

Source: Motley Fool CAPS screener; price return from Nov. 27 to Dec. 24.

You can run your own version of this screen; just remember that the data is dynamically updated in real time, so your results may vary. That said, let's examine why investors might think these companies will go on to beat the market.

Hershey
Cadbury may not fancy the unsolicited bid from Kraft (NYSE:KFT), but that doesn't mean Hershey is in a position to make a counteroffer that's better for the chocolate maker. Taking on some $10 billion, as would occur if it were successful, would possibly jeopardize its credit rating, but the English candy maker's operations in Mexico, India, and South Africa do provide a tasty international morsel.

Investors like CAPS member thomasdiorio remain convinced it will be a sweet deal for Hershey to pull off:

I believe they will eventually win the Cadbury Conflict, but being scrutinized before their bid has put them in a negative position. decent buying opportunity over the upcoming weeks. This finally gives them a chance to go international, they've been very slow to globalize themselves and this is the perfect opportunity

Jos. A. Bank Clothiers
Men's suit retailer Jos. A. Bank Clothiers has recorded 14 consecutive quarters of profit that are higher than in the year-ago period -- even through the Great Recession. International investing may be in vogue right now, but this clothier is one stock that's even better than a bet on China.

CAPS member rknapton might agree that Jos. A. Bank dresses the part of a winning investment:

This mens apparel retailer has 425 stores in 42 states. Even with in the face of a recession they have been able to grow revenues 27% since 2007 and earnings by 35%. This seems company seems like quite a bargain considering it is trading at just 13 times trailing earnings and less than 11 times forward estimates (which have been getting bumped up over the past 90 days). Add in the fact they have $0 debt and $126 million in cash, well you've got an even better deal yet.

Keryx Biopharmaceuticals
The CAPS community is apparently impressed with the fast-track status Keryx Biopharmaceuticals has won from the FDA for its white blood cell cancer therapy, as 90% of the almost 200 members rating the biotech believe it will outperform the market. Combine that with orphan drug status for its multiple myeloma therapy and late-stage clinical trials for treatment for tumors in bone marrow, along with several other positive developments, and it's easy to understand why ebitdat thinks it's "way undervalued."

Three for free
Are these companies still a good value and ready to make their move? I'm heading over to CAPS to mark them to outperform the broader averages. If you agree join me there, or let us know in the comments section below what you think.

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've got to say about these, or any other stocks that you think are starting to rev their engines.