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

Source: Motley Fool CAPS Screener; trailing performance from March 26 to June 21.

VeriSign, in fact, was previously picked as a stock ready to run just this past February. 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 59 stocks the screen returned, here are three that are still attractively priced, but that investors think are ready to run today:

Source: Motley Fool CAPS Screener; price return from May 28 to June 21.

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.

A123 Systems
Supplying batteries to one of the sleekest electric cars coming to market -- the Fisker Karma -- cements A123 System's position as the go-to battery company for next-gen alternative energy vehicles. CAPS member nooriesha sees it as being part of a very small, very select group of battery makers:

Solar Energy is growing as cost cutting process and the need for batteries are high. AONE is one the good battery manufacturer after Exide (Nasdaq: XIDE). There is a high growth potential for this stock. My target is $10.75 in couple weeks.

Federal Agricultural Mortgage
After Fannie Mae's (NYSE: FNM) and Freddie Mac's (NYSE: FRE) collapse and pending delisting, the taxpayers tab for these debacles may grow to as much as $1 trillion, according to some reports. Farmer Mac, the nickname for Federal Agricultural Mortgage, has managed to avoid the same miscues, and investors are warming up to its prospects.

CAPS member Smalls62 says investors would be missing out on Farmer Mac's potential if they view it through the same lens as its failed brethren:

What do you see happening with the electrical grid, wind and solar farms? Major upgrades and expansion. [Federal Agricultural Mortgage] can loan on any cooperative electric so those types of projects are not the limits. Do you need a bigger neon sign? American Power Act will make development in these sectors even bigger if passed. Lumping this GSE with FNM/FRE is a major mistake.

Steven Madden
Although EmmyKaye thinks fashionistas will be the reason cobbler Steven Madden will outperform the market, bizcbug7 looks toward its top performance and a new buyback program as evidence of better times ahead.

The CAPS community agrees. Of the more than 200 members that have rated the shoe salesman 88% see it outperforming the broad market averages. Walk on over to the Steven Madden CAPS page and put your best foot forward with an opinion on its prospects.

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 box below whether you think these or any other stocks are starting to rev their engines.