3 Stocks Ready to Roar

There are plenty of strategies for picking winners: low P/E stocks, companies selling at a discount to their future cash flows, and more. At the small-cap service Motley Fool Hidden Gems, the analysts are staying ahead of the market, even in these times, by finding undervalued stocks that have been ignored.

Yet what if we could find a way to whittle down our list of prospects beforehand, finding those stocks whose engines are just getting warmed up?

Using Motley Fool CAPS, an investor intelligence database, I screened for companies that investors had marked up before their stocks began to move up over the past three months -- while the market was headed south, for the most part. My screen returned 129 stocks and included these recent winners:

Source: Motley Fool CAPS Screener; trailing performance from Feb. 6 to May 4.

AEGON, in fact, was picked as a stock ready to run in February, and so far, it's living up to its potential. So while this screen might tell us which stocks we should have looked at three months ago, what we want are the stocks that we ought to be looking at today. I went back to the screener and looked for stocks that had just been bumped up to three stars or better, sport valuations lower than the market's average, and whose price hasn't risen by more than 10% over the past month.

The screen returned 34 stocks: Here are three that are still attractively priced and that some investors think are ready to run today.

Source: Motley Fool CAPS Screener; return from April 9 to May 4.

Though the results you get may be different because the data is updated in real time, you can run your own version of this screen. Let's take a look at why investors might think these companies will go on to beat the market.

ACE
Insurance provider ACE benefited from a "generally firming market," spurring new polices and higher revenue from premiums. CAPS member LngTrmVw says that should lead to better results.

the change in earnings over each of the last four quarters and the current quarter estimate shows strong acceleration in the quarterly growth rates, which should lead to a improvement in earnings growth.

Dean Foods
Dean Foods was able to post higher earnings because lower commodity costs boosted profits. The dairy company also announced a secondary stock offering that will give it proceeds to pay down its debt. United States Steel (NYSE:X) recently had a successful offering, so the time may be right for Dean Foods.

Steinway Musical Instruments
It seems hard to disagree with CAPS All-Star GunnarVagotis, who said more than a year ago that rather than buying Steinway pianos in this economy, people would be breaking them up for firewood.

When the economy tanks people will be busting up Steinways to make torches so they can see their way around the caves they are living in.

That may have been a good call as the economy spiraled out of control, but more recently, the hedge fund ValueAct Capital Management, Steinway Musical's majority shareholder, bought $1.6 million worth of stock on the open market, increasing its holdings to about 13% of the company's outstanding shares. That vote of confidence could be music to investors' ears.

Three for free
It pays to start your own research on these stocks on Motley Fool CAPS. Read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made -- all from a stock's CAPS page. Head over to the completely free CAPS service and let us hear what you have to say about these or any other stocks that you think are starting to rev their engines.