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 80 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 Dec. 31 to March 28. *Out of 5 stars.

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 68 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 March 4 to March 28.

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.

CarMax
Used car dealer CarMax is scheduled to report earnings in a couple of days and analysts feel confident it won't be a jalopy that drives off the lot. Even in the face of increased competition from AutoNation (NYSE: AN) and Group 1 Automotive (NYSE: GPI) -- dealers that mix both new and used cars -- the company's straight up, no-haggle model resonates well with consumers.

CAPS member bartdz says CarMax has held its own throughout the recession, and with the economy making a feeble attempt at recovery, it should prosper even more: "Fabulous stock performance over past two years and now the economy is catching up - should support continued strong growth going forward."

Put the used car dealer on your own watchlist and drive over to the CarMax CAPS page and let us know if you think it will be up on blocks after Thursday's earnings report.

Spreadtrum
Chinese wireless chip maker Spreadtrum is looking to ship 50 million to 60 million chips this year, even more than what it previously thought it would do in supporting the country's TD-SCDMA cellular standard. And though inventory more than doubled in the latest quarter, raising the specter it was engaged in some channel stuffing, analysts seem assured it derives from customer demand.

The risk is that margins may take a hit going forward, since it is a price-competitive environment. Sales last quarter quadrupled, but at much lower price points, though the end result put them in better stead than Marvell Technology (Nasdaq: MRVL).

There's a lot to fear in Chinese small-cap stocks these days, but CAPS All-Star member IBDvalueinvestin says Spreadtrum isn't one of them. Let us know on the Spreadtrum CAPS page whether it can dial up higher growth still.

Sunrise Senior Living
Assisted living operator Sunrise Senior Living was another company that beat analyst expectations recently, though a lot of its gains were made on the backs of one-time revenue gains. But having improved its financial position, Sunrise actually finds itself in a better place, just as the industry moves into a stronger wave of consolidation.

Early on it sought to grow by shrinking its footprint, selling off facilities to rival Brookdale Senior Living (NYSE: BKD), and health-care REITs made some $11.3 billion in acquisitions last year. Now Ventas snatched up Nationwide Health Properties for $7.4 billion.

mikehep5 thinks the sun's rising on Sunrise again and with a portfolio of leading properties should be able to grow:

The Company has turned the corner on its debt problems and is in an industry poised for tremendous growth. Their facilities are top quality and they just need to maintain the same degree of energy and expertise in growing the company as they did in repairing it.

Retire to the Fool's free portfolio tracker and see if Sunrise Senior Living is in its twilight years or still hale and strong.

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.