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 153 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 Oct. 8 to Jan. 4. CAPS rating = out of five stars.

Aixtron, in fact, was picked as a stock ready to run in August, and represented a period when the market rose by 13%. 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:

Source: Motley Fool CAPS Screener; price return from Dec. 10 to Jan. 4. CAPS rating = out of five stars.

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.

Sify Technologies
Having regained Nasdaq compliance last month -- a formality, really -- and with economist Nouriel Roubini believing that India may surpass China in growth over the next decade, Sify Technologies could be one of the many companies based in the subcontinent that enjoys tremendous growth.

Rediff.com India (Nasdaq: REDF) is also looking to capitalize on the country's intention to increase its number of broadband connections by 700% next year. That sort of investment would enable both Indian Internet specialists to surge, and helps explain why 93% of the nearly 300 CAPS members rating Sify believe it will outperform the broad market averages.

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

STR Holdings
Regardless of the technology used to manufacture solar panels, manufacturers need encapsulants to protect the circuitry. STR Holdings is the company most of them turn to for this component.

First Solar (Nasdaq: FSLR) accounts for more than a quarter of STR's revenue, and STR's top five customers account for 55% of sales. It seems that if the solar industry has a future, so does STR.

While highly rated CAPS All-Star rhallbick thinks the short-term growth story might be a bit cloudy, STR is gaining share within the solar industry that will rain down profit later on:

Overall, it doesn't appear that the industry will see much further growth in the short term, although [STR Holdings] seems to be bettering its position by gaining market share. Profit margins in the sector are expected to be under pressure in the immediate future as end-product sales prices fall and government subsidies are reduced.

Whirlpool
North America might be sluggish, but emerging markets are providing appliance maker Whirlpool a rich opportunity for growth. Latin America, for example, saw Whirlpool sales surge 13%, to $1.1 billion, while Asia enjoyed a 21% growth spurt, although its size is still much smaller. That gives Whirlpool an even longer ramp to increase revenue there.

It's a better opportunity than waiting for Sears Holdings (Nasdaq: SHLD) to turn around. Whirlpool supplies Sears with its Kenmore brand, as well as its Maytag, Amana, and eponymous products, and the retailer accounts for 10% of Whirlpool's sales. While Sears still owns about a third of the major appliance market (down from over 40% a decade ago), it is struggling to gain any kind of traction.

Considering the prospects for growth in India and Brazil, CAPS All-Star TMFDeej says Whirlpool is cheap:

Great exposure to emerging markets like India & Brazil. Decent 2.2% dividend. Trading at only 8 times estimated 2010 earnings.

You can add the appliance maker to the Fool's free portfolio tracker, then apply yourself on the Whirlpool CAPS page by giving us your opinion on its future.

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.