There are plenty of strategies for picking 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 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 149 stocks when I ran it, no doubt reflecting the market's continued recovery, and included these recent winners:
|
Stock |
CAPS Rating
|
CAPS Rating
|
Trailing 13-week Performance |
|---|---|---|---|
|
Oncothyreon (NASDAQ:ONTY) |
** |
**** |
7% |
|
Quantum (NYSE:QTM) |
** |
*** |
9.8% |
|
Research In Motion (NASDAQ:RIMM) |
** |
*** |
19.8% |
Source: Motley Fool CAPS Screener; trailing performance from Nov. 27, 2009, to Feb. 22.
Research In Motion, in fact, was picked as a stock ready to run in October. But while this screen might tell us which stocks we should have looked at three months ago, we'd rather find the stocks we ought to be looking at today. I went back to the screener and looked for stocks that had just been bumped up to three stars or better, sport valuations lower than the market's average, and whose prices haven't appreciated by more than 10% in the past month.
Of the 57 stocks the screen returned, here are three that still have attractive prices, but some CAPS investors think they are ready to run today:
|
Stock |
CAPS Rating
|
CAPS Rating
|
Trailing 4-Week Performance |
P/E Ratio |
|---|---|---|---|---|
|
KMG Chemicals (NASDAQ:KMGB) |
** |
**** |
(3.8%) |
11.3 |
|
Boise (NYSE:BZ) |
** |
*** |
(8.1%) |
5.0 |
|
TrustCo Bank Corp NY (NASDAQ:TRST) |
** |
*** |
0.5% |
16.4 |
Source: Motley Fool CAPS Screener; price return from Jan. 29 to Feb. 22.
You can run your own version of this screen on CAPS; just remember that the data is 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.
KMG Chemicals
Specialty chemicals company KMG Chemical has been flying under the radar of Wall Street with only one analyst covering it, surprising because it's the principal supplier of creosote for preserving railroad ties in the U.S. Because it also serves a reviving semiconductor industry, CAPS member eastedition is happy about the recent drop in its stock price.
Good growth history, favorable financials, Effective producer of specialty chemical products. Expect continued domestic and international demand. Taking advantage of recent decline.
Boise
Analysts are looking for improving fundamentals in the paper and forest products sector, which has stabilized, according to officials from industry leader International Paper (NYSE:IP). As a result, CAPS member carbondo says Boise ought to benefit as the economy steadies itself.
In this Bear market only the basics, makes sense. BZ resources match up with real manufacturing needs during a recovering economy.
TrustCo Bank Corp NY
Regional bank holding company TrustCo Bank Corp NY has been paying dividends for 106 consecutive years, a streak started in 1904. CAPS All-Star mrindependent notes that it made it through the Great Recession without a losing quarter.
Instead of relying on formulas that were "good enough" to repackage, Trustco has always performed its own detailed credit analysis. Unlike other savings and loans, Trustco was unwilling to make subprime loans and was also unwilling to purchase securities that were backed by subprime loans. This discipline served the company well. Despite these conservative practices, Trustco managed to grow at a respectable pace while averaging a 21 percent return on equity over the last 9 years.
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. Join me there to comment, or let us know what you think in the comments section 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 let us hear what you have to say about these or any other stocks that you think are starting to rev their engines.
