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 171 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 Aug. 20 to Nov. 17.

Deckers Outdoor, in fact, was previously picked as a stock ready to run in August, and represented a period when the market rose by 10%. 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 48 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 Oct. 22 to Nov. 17.

You can run your own version of this screen over on CAPS. Just remember that the data are 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.

Bridgepoint Education
Investors in for-profit educators like Apollo Group (Nasdaq: APOL) and Strayer Education (Nasdaq: STRA) are rightly fretting about proposed new regulations holding the schools accountable for their students getting jobs after they graduate. Shares in the sector dropped as new investigations were launched, which may affect their ability to receive federal funding.

Bridgepoint Education is bucking that trend, and over the past three months its shares are some 12% higher. CAPS member Loerke is skeptical that it or the for-profit segment generally can keep that going as traditional colleges move into the online space.

Competition from real universities is something most investors don't understand: most of these traditional schools are now offering online and continuing education courses, often in remote parts of the globe, that use precisely the same business models that outfits like Phoenix are using. Universities finance their traditional programs out of these for-profit enterprises.

Adding Bridgepoint to your watchlist allows you to stay on top of all the Foolish news and analysis as they develop.

Hartford Financial
As Ben Bernanke continues to debase the currency in an effort to fight apparently non-existent inflation, the policies continue to wreak havoc on far-flung sectors of the economy. Travelers (NYSE: TRV) and Hartford Financial are just two insurers who use their "float" to generate revenues by investing in interest-rate-sensitive securities and who are getting mauled by Bernanke's interference in the marketplace.

It was earlier this summer that CAPS member pjmalloy had hoped Hartford's revamped annuities would lead it back to prosperity.

Company has survived the worst and is getting stronger. The Hartford's annuity business should see a gain as investors shift to annuities to protect their investments.

But the artificially low rates the Fed has maintained has made it difficult for investors to choose an annuity in the face of higher returns elsewhere, and Hartford said sales have not met expectations.

Internet Capital Group
Investing in a focused portfolio of companies that sell software as a service, Internet marketing firms, and companies that use technology to provide outsourced services, Internet Capital Group enjoyed revenues that increased by a third over last year though profits fell, as it continues to sell out of its position in Blackboard, an education software provider.

With 83% of the CAPS members rating Internet Capital to outperform the broad market averages, it's apparent they believe the situation will continue to be favorable for it to realize fair prices for its investments. Let us know on the Internet Capital Group CAPS page if it's an investment you should be making, too.

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.