There are plenty of strategies for picking stock winners, from finding low-P/E stocks to seeking companies that are selling at a discount to their future cash flows. At the small-cap investment service Motley Fool Hidden Gems, the analysts are able to stay ahead of the pack, even in this market, 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 investors marked up before the share prices rose over the past three months. My screen returned just 101 stocks when I ran it, no doubt reflecting the market's turmoil during that time, and included these recent winners:


CAPS Rating (out of 5), 11/3/10

CAPS Rating, 2/3/11

Trailing-13-Week Performance

Carrols Restaurant Group




Red Robin Gourmet Burgers




Vital Images




Source: Motley Fool CAPS screener; trailing performance from Jan. 21 to April 19.

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 56 stocks the screen returned, here are three that are still attractively priced, but which investors think are ready to run today:


CAPS Rating (out of 5), 2/3/11

CAPS Rating, 5/3/11

Trailing-4-Week Performance

P/E Ratio






CreXus Investment (NYSE: CXS)





eMagin (Nasdaq: EMAN)





Source: Motley Fool CAPS screener; price return from March 25 to April 19.

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. For now, let's examine why investors might think these companies will go on to beat the market.

You always have to wonder about companies that try to win in the courtroom what they can't gain in the marketplace. Sprint Nextel (NYSE: S) is taking its case against AT&T's merger with T-Mobile and shopping it around to various state attorneys general. Because some states are more aggressive in regulating customer contracts than is the federal government, Sprint believes that it will stand a better chance of convincing one of them to derail the buyout.

Connecting AT&T and T-Mobile will indeed make the resulting company a bigger, stronger organization, surpassing even Verizon in size, but that doesn't mean it will hurt consumers, as Sprint contends. CAPS member ssouvigny sees the merger as another step toward reassembling the Ma Bell that the government forcibly broke apart: "As a 30 year veteran of AT&T, I have watched the metamorphosis of the Bell System through divestiture to rebirth as the new at&t. It became evident that Ed Whitacre and SBC were going to reassemble as much of the Bell System as they could to prepare for the coming renaissance in Telephony, Wireless broadband communications and the Smart Phone."

Let us know on the AT&T CAPS page or in the comments section below whether you think this merger is a good idea.

CreXus Investment
Commercial real estate investor CreXus Investment is another company being sued over a merger -- one that it declined to undertake with Starwood Property Trust (Nasdaq: STWD). Instead of merging with Starwood, CreXus bought a real estate loan portfolio from Barclays that it financed through a 50 million-share offering. A shareholder objected to CreXus' decision to snub Starwood and is seeking class action status.

The threat of courtroom drama aside, CAPS member ArfytheSeal believes CreXus offers investors a pretty good portfolio of properties that's undervalued: "The company invests in commerical real estate (CRE) mortgages through both securities (commercial [mortgage] backed securities, or "CMBS") and through individual [mortgage] loans. The portfolio is managed by the folks from Annaly, a residential mortgage REIT with an excellent long-term track record."

Tell us on the CreXus Investment CAPS page whether you think the company can continue to be a growth story.

Imagine, if you will, a specialized technology maker having the field to itself for products the military finds essential, and you'll understand the bull case for eMagin, a maker of active-matrix organic LED micro-displays on silicon. Through contracts with ITT (NYSE: ITT) and FLIR Systems (Nasdaq: FLIR), eMagin has a pipeline to the military for night-vision goggles and thermal-imaging cameras.

A few more than a baker's dozen of CAPS All-Stars have weighed in on the micro-display maker, but only one thinks it won't be beating the broad market averages going forward. Display your own opinion on the eMagin CAPS page and add the stock to the Fool's free portfolio tracker to see whether it becomes a mega-hit.

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.