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 124 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 June 25 to Sept. 24.

Gol Intelligent Airlines, in fact, was previously picked as a stock ready to run in June, and represented a period when the market rose by almost 7%. 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 38 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 Aug. 27 to Sept. 24.

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.

Lear
Auto parts supplier Lear came out from under court protection last winter, just in time to see Ford (NYSE: F) catch a wave of pent-up consumer demand, even though there are concerns about fleet sales. With General Motors preparing to return to the public markets, indicating a recovery is taking hold, Lear needs to keep its own momentum going.

Yet it might also account for Lear flying under the radar of much of the investment community, though 89% of CAPS members rating the auto parts supplier believe it will outperform the market. You can bolt on your opinion on the Lear CAPS page as to whether you think it might make for an attractive merger target and add it to your My Watchlist page to have all the Foolish news and analysis aggregated for you in one place.

Puda Coal
Puda Coal is a Chinese supplier of high-grade metallurgical coking coal to the country's industrial base, and handily beat second-quarter analyst estimates of $0.24 per share by turning in a $0.36 per share effort. Revenue jumped 72%, as higher sales volumes coupled with higher average selling prices helped cement the image that China still runs on coal. While that scenario will likely help fellow miner Yanzhou Coal Mining (NYSE: YZC), look for even U.S. producers like Peabody Energy (NYSE: BTU) with extensive operations in Australia to benefit too.

CAPS member minnesotaguy says Puda is a bet on Chinese economy getting hot once again.

China is putting [nuclear plants] in for power but [nuclear plants] don't make coke for steel industry. Caveat is Chinese goverment gives this deal a big edge but may also take the deal away some day. For now market is running against it but this looks like a classic buffet buy (low) with good value.

Valley National Bancorp
My first checking account ever was at Valley National Bancorp. Today it's a much bigger operation than what it was back then when it seemed a sleepy neighborhood banking operation. It's become one of the top 15 highest yielding banks in the country, which might not necessarily be a list you want to see it on. But profit triple last quarter, beating estimates, as Valley generated high amounts of non-interest income.

But nearly a quarter of CAPS members rating the regional bank think you can't bank on future market-beating performances. Since the stock peaked back in April, shares have fallen by almost 20%. You can deposit your view of whether there's still interest here by heading over to the Valley National Bank CAPS page.

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.