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 investment 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 114 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 Oct. 23 to Jan. 22.

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

Of the 41 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 Dec. 24 to Jan. 22.

You can run your own version of this screen over on CAPS; just remember that the data's 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.

AmerisourceBergen
Highly rated CAPS All-Star TMFHelical suggested that health-care reform might have been a net plus to drug distributors like AmerisourceBergen. But the results the wholesaler posted this morning show that even with reform legislation's fate uncertain at present, the generics business will carry the company forward:

AmerisourceBergen, along with McKesson, are the main 'toll takers' on the road from pharmaceuticals to patients. They are both drug distributors to hospitals and pharmacies, and benefit from volume. The passage of universal health should benefit both to a degree. Alongside that ABC has business units that attempt to consult with pharma as to the changing landscape in drug sales. Some warts in the past, but priced well here IMO.

Unum Group
Group insurance provider Unum Group is also benefiting from stalled-out health-care reform efforts; 93% of CAPS members rating Unum think it now might be the "one." Fellow Fool Brian Pacampara thought the company was poised to pop just last month. Make your own opinion heard on the Unum CAPS page.

Cytokinetics
Even after its collaboration with GlaxoSmithKline (NYSE:GSK) was dissolved late last year, Cytokinetics continues to intrigue CAPS members, who overwhelmingly believe that its focus on muscle biology programs will be a better avenue of growth than the cancer path the company was pursuing with GSK.

Although fewer than 100 investors have rated the biotech thus far, 82% of them believe it will outperform the broad market averages in the months ahead. Let us know on the Cytokinetics CAPS page whether you think it can inoculate itself from further harm.

Three for free
Are these companies still a good value, 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 share your opinions in the comment box below.

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 post your thoughts on these or any other stocks that you think are starting to rev their engines.