3 Stocks Ready to Roar

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 flows. At the small-cap stock-picking 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. (The market as a whole climbed sharply, then traded sideways, during that same period.) My screen returned 105 stocks when I ran it, no doubt reflecting the market's continued recovery, and included these recent winners:

Source: Motley Fool CAPS Screener; trailing performance from Aug. 14 to Nov. 9.

Revlon, in fact, was previously picked as a stock ready to run in July. But 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 59 stocks the screen returned, here are three that are still attractively priced, but which investors think are ready to run today:

Source: Motley Fool CAPS Screener; price return from Oct. 16 to Nov. 9.

You can run your own version of this screen; 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.

Home Depot
We want to believe that the housing industry is on the road to recovery, though with the government ready to extend a homebuyers' tax credit, it seems housing's wobbly legs may still need support. CAPS member val1nyc thinks Home Depot will benefit from the industry's efforts to rebuild itself from the ground up: "With the housing market recovering, suppliers are going to profit and I think HD is better positioned than Lowe's (NYSE:LOW) to take advantage of the situation."

Oncothyreon
German drugmaker Merck KGaA is ready to give Oncothyreon's Stimuvax cancer vaccine a big push, which is heating up the biotech's shares. CAPS member carsondyle suspects that the company is confident in its ultimate success: "Merck showing confidence in ONTY by starting multiple clinical trials at the same time with there main drug Stimuvax."

STEC
CAPS All-Star member fmahnke recently blogged that it seems silly for the market to scold solid-state disk drive maker STEC so severely, just for providing a bit of conservatism in its guidance:

I've  rarely seen a stock get punished so much over what appears to a small amount of caution in  the outlook,  My model suggest this stock worth $20, three analysts who downgraded the stock to hold have average targets of $18,

Three for free
Are these companies still good values 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 what you think.

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 your opinions on these or any other stocks with potentially promising prospects.