Warren Buffett made billions buying undervalued companies before market sentiment swung back in their favor. Legendary sandalwood bandit Veerappan, he of the handlebar mustache extraordinaire, made his personal fortune by staying one step ahead of the law. And our Motley Fool Hidden Gems newsletter is currently beating the market by 16 points with its recommendations of small-cap companies like Ctrip.com (NASDAQ:CTRP), up 193% since its first recommendation, that hadn't yet registered on Wall Street's radar.

With these examples in mind, I used our new CAPS screening tool to find the stocks poised for big gains -- before Wall Street catches on.

They have:

  • Trailing-three-year earnings growth of at least 10%.
  • Market capitalizations of at least $300 million.
  • Four- or five-star ratings in Motley Fool CAPS, up from one, two, or three stars at the beginning of 2008.

Remember, in the first year for which we have data, newly minted four-star stocks like Yingli Green Energy (NYSE:YGE) (up 165% during that year) outperformed all other categories, yielding 41% on average.


Share Price


Market Cap

Biogen Idec (NASDAQ:BIIB)


Health care

$17.4 billion

General Steel (NYSE:GSI)


Basic materials

$529 million




$4.7 billion

Wyeth (NYSE:WYE)


Health care

$62.8 billion

Xcel Energy (NYSE:XEL)



$8.8 billion

Data from Motley Fool CAPS and Yahoo! Finance as of July 1.

Come and join us on Motley Fool CAPS to dig into these companies further. Let our 110,000-person-strong (and counting) CAPS community help you stay a step ahead.

Or, if you'd like to check out the official list of Hidden Gems recommendations that have been crushing the market (along with our rationale for each pick), you can click here for a free 30-day trial.

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