3 Stocks Set to Soar

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 flow. 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 46 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 April 20 to July 18. CAPS rating = out of five 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 18 stocks the screen returned, here are three that are still attractively priced, but that investors think are ready to run today:

Source: Motley Fool CAPS Screener; price return from June 22 to July 18. 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.

Pozen
Right now Pozen is able to sing only one note, its arthritis and gastric ulcer treatment Vimovo, for which it receives royalties from AstraZeneca. But it has a bioequivalent of a type of enteric-coated aspirin, PA32540, that it's running past the FDA, and while Pozen recently ran into a roadblock -- the regulatory agency wants it to run an in vivo bioequivalence study for the combination product -- the biotech believes it will prevail and prove its case. And Pozen just received a patent for the delivery of compositions that contain aspirin and proton pump inhibitors, a portfolio that includes PA32540, so things are looking hopeful.

Tell me on the Pozen CAPS page whether you agree, and then add its stock to the Fool's free portfolio tracker to follow its progress.

Quiksilver
Retailer Quiksilver has suffered more scrapes and bruises than the teen skate crowd it caters to, as its shares are down more than 50% from where they traded a year ago. Yet Quiksilver's latest earnings report showed revenues inching higher, generating losses that were narrower than in the year-ago period. Even Pacific Sunwear (Nasdaq: PSUN) has bounced off the lows it hit this past spring, and with Zumiez soaring higher, teen retailers may be able to put behind them the grinding unemployment that ravages their target audience. Let us know on the Quiksilver CAPS page whether it can skate past these problems and grow.

Time Warner
Unlike the other two stocks mentioned here, media and entertainment giant Time Warner has actually been doing quite well for itself. Shares are up 8% so far in 2012 and 10% over last year, and are actually up 45% from their 52-week low point. For such media empires, content is king, and Time Warner has its finger in many pies providing that content: TV, movies, magazines, and more. And if rumors prove true, it may get into gaming. Reuters recently reported that another media powerhouse, Vivendi, was looking to shop gaming giant Activision Blizzard (Nasdaq: ATVI) and Time Warner was one of the names floated as a possible buyer.

Earlier this year CAPS member YARDBIRD6 said "youngsters are having a field day" these days with the revival of comic book heroes, and that plays to Time Warner's strengths. Tell us on the Time Warner CAPS page or in the comments section below whether you think shares of this mega-media conglomerate will continue to exhibit superhuman strength.

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, and if stocks like Time Warner that pay dividends are your thing, then check out this free report: "Secure Your Future With 9 Rock-Solid Dividend Stocks." You can read it for free, but hurry, because it won't be around for long.