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 just 109 stocks when I ran it, no doubt reflecting the market's turmoil during that time, and included these recent winners:

Source: Motley Fool CAPS screener; trailing performance from 5/7/10 to 8/6/10.

Telestone Technologies, in fact, was previously picked as a stock ready to run in 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 49 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 7/9/10 to 8/6/10.

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.

Air Transport Services Group
Over the past month, as the S&P 500 rose 4%, the CAPS Freight Services sector has doubled those gains, as positive earnings results from UPS (NYSE: UPS) helped push up industry peers like FedEx and Air Transport Service Group, whose own result helped deliver the goods.

Back in April, CAPS member  mac1579 figured Air Transport's new deal with DHL would help send the stock aloft. It got new seven-year leases with the delivery specialist covering 13 freighters as well as a separate crew and maintenance contract.

New contract with DHL will support [Air Transport Service Group] for the near future. Company is run tight with no frills.

BlackRock
With gold hot, it's not surprising that BlackRock sought to gain advantage over the SPDR Gold Trust, which is managed by State Street (NYSE: STT), by cutting the fees on its own gold ETF, splitting its price, and waging a public-relations offensive. It's boosted volume on the fund by 50% as of the end of last month. CAPS member JKGriggs says BlackRock is the leading ETF provider now, which ought to cause its stock to glitter, too.

Largest provider of ETFs since Barclay's Global Investments (BGI) acquisition, including the ishares ETF division. Stock has looked great since, should converge to a price of $215

Discover Financial Services
With more than 50 million cardholders, Discover Financial Services is the fourth-largest credit card company in the U.S., but according to CAPS member OmegaSD, it's a more conservatively run operation than either MasterCard or Visa (NYSE: V):

Discover has always managed more conservatively than its peers. It was berated for this when other lenders grew a lot in the sub-prime space, and now [Discover Financial] is reaping the benefit of its strategies. Going forward, Discover has the most room to grow compared to its peers, and with the expected integration of the Diners Club network in the next few years, there's a lot of upside, as far as market share and acceptance, domestically and internationally. It also looks good to grow its banking deposits.

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

Discover Financial Services is a Motley Fool Inside Value choice. FedEx is a Motley Fool Stock Advisor selection. United Parcel Service is a Motley Fool Income Investor recommendation. Try any of our Foolish newsletter services today, free for 30 days.