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 140 stocks when I ran it, no doubt reflecting the market's continued recovery, and included these recent winners:


CAPS Rating 9/1/09

CAPS Rating 12/1/09


13-Week Performance

Ariad Pharmaceuticals (Nasdaq: ARIA)




Atmel (Nasdaq: ATML)




Safeguard Scientifics (NYSE: SFE)




Source: Motley Fool CAPS Screener; trailing performance from Dec. 4 to March 1.
CAPS rating is out of five.

Safeguard Scientifics, in fact, was picked as a stock ready to run just this past December. 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 45 stocks the screen returned, here are three that are still attractively priced, but which investors think are ready to run today:


CAPS Rating 12/1/09

CAPS Rating 3/1/10


4-Week Performance

PE Ratio

Par Pharmaceutical Companies (NYSE: PRX)





Sara Lee (NYSE: SLE)





Steris (NYSE: STE)





Source: Motley Fool CAPS Screener; price return from Feb. 5 to March 1.
CAPS rating is out of five.

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

Par Pharmaceutical
Back in November, CAPS member bizcbug7 said generic-drug maker Par Pharmaceutical had a deep enough pipeline to ensure future growth:

Strong pipeline and lineup of generics. Industry will likely remain strong with cost being a factor as is baby boomers.
Sound balance sheet with exceptional cash position. 
PEG 0.18, P/S 0.8.

That faith was rewarded when Par reported earnings last month of $0.65 a share, which was well ahead of analyst expectations of just $0.55 a share, as a few of its generic drugs had limited competition and it launched three new therapies.

Sara Lee
Nobody doesn't like Sara Lee, particularly CAPS members like doctorklc, who say the company's turnaround efforts should begin paying dividends soon:

This stock used to hold steady at about $20/share. It was a dog for a long time. They have been restructuring now for about 2 years and it should start to pay off. Unfortunately, most of their brands are so-so and mature. Nonetheless, they should gradually get back to the $20 range (14-15 P/E) but don't expect a barn-burner unless I missed something.

While 78% of CAPS members who have rated Sara Lee peg it to outperform the market, 85% of the All-Stars weighing in feel confident that the owner of Sunbeam, Jimmy Dean, Ty-D-Bowl, and its own eponymous brand will beat the broader averages.

After falling from its highs in December, medical-products maker Steris was another whose stock rebounded in the third quarter as earnings received a boost from restructuring efforts. CAPS All-Star FoolSolo said the recent pullback looked like a good opportunity for investors to jump in.

The swine flu outbreak has led to more sales of hygiene products, just as nibs61 expected would happen last October:

Another company in line to benefit from the flu season scare and the better educated people who know that sanitized hands can reduce chances of getting germs. This company is trading in the mid range of it 52 week high and low. With the season coming on I see a nice uptick for this flu season play.

Yet like GlaxoSmithKline (NYSE: GSK) and other companies with thumbs in the H1N1 scare, Steris says equipment orders in its health-care unit are "stabilizing." This could mean it's the end of the swine flu era.

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. 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.

The Fool owns shares of GlaxoSmithKline. Try any of our Foolish newsletter services today, free for 30 days.

Fool contributor Rich Duprey does not have a financial position in any of the stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.