There are plenty of strategies for picking stock winners: low P/E stocks, companies selling at a discount to their future cash flows, and more. At the small-cap stock picking service Motley Fool Hidden Gems, even in this market, the analysts are able to stay ahead of the market 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 whose engines are just getting warmed up?
Using the investor intelligence database of Motley Fool CAPS, I screened for stocks that were marked up by investors before their stocks began to move up over the past three months in a market that has headed south in a dramatic fashion. My screen returned 148 stocks when I ran it and included these recent winners:
|
Stock |
CAPS Rating 2/20/09 |
Trailing 13-week Performance |
|
|---|---|---|---|
|
BB&T |
** |
*** |
50.9% |
|
Crosstex Energy |
** |
**** |
50.4% |
|
Neutral Tandem |
* |
*** |
47.2% |
Source: Motley Fool CAPS Screener; trailing performance from Feb. 20 to May 19.
BB&T and Crosstex Energy were picked as stocks ready to run in September and December of last year. 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 were just bumped up to three stars or better, sport valuations lower than the market's average, and whose price hasn't moved up over the past month by more than 10%.
Here are three stocks out of the 38 the screen returned that are still attractively priced but which investors think are ready to run today!
|
Stock |
CAPS Rating 2/19/09 |
CAPS Rating 5/19/09 |
Trailing 4-Week Performance |
P/E Ratio |
|---|---|---|---|---|
|
Guess? |
** |
*** |
(5.1%) |
10.1 |
|
Pactiv |
** |
*** |
1.0% |
10.7 |
|
Vascular Solutions |
** |
*** |
3.2% |
6.4 |
Source: Motley Fool CAPS Screener; price return from April 24 to May 19.
Though the results you get may be different since the data is dynamically updated in real time, you can run your own version of this screen. But let's take a look at why investors might think these companies will go on to beat the market.
Guess?
Retail remains in a recession as consumers are still leery about spending money on anything but necessities. Yet CAPS member GTK1004 suspects that like teen retailer Volcom
Pactiv
Last November, CAPS All-Star Jeffreyw suggested that specialty packaging company Pactiv wouldn't be affected by the recession, yet shares still plummeted:
The market meltdown will have little impact on packaging, in fact it may spur more innovation for more efficient insulation and protection at lighter weights in packaging products, all to deliver products in perfect condition at lowest cost and fuel efficiency
Thus it was only the analysts who ended up being surprised by Pactiv's first-quarter results and the fact that the company raised its full-year guidance above their expectations.
Vascular Solutions
It might have been overreaction to the general economic malaise that caused Vascular Solution's stock to fall this past year, as CAPS member OklaBoston suggested, but even the suspension of product in development by a partner couldn't keep the medical device maker's stock down after the company reported earnings in line with expectations:
The underlying Co. enjoyed it's best return on equity in 5 years these last 12 months. So the recent dip in the stock's price is probably the fault of people overreacting to the general market's slump. Can anyone come up with a better explanation?
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. Why not head over to the completely free CAPS service and let us hear what you've got to say about these or any other stocks that you think are starting to rev their engines?
