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. My screen returned 142 stocks when I ran it, no doubt reflecting the market's continued recovery, and included these recent winners:


CAPS Rating July 5, 2009

CAPS Rating 10/5/09

Trailing 13-Week Performance





i2 Technologies (NASDAQ:ITWO)




KKR Financial (NYSE:KFN)




Source: Motley Fool CAPS Screener; trailing performance from Oct. 9 to Jan. 4.

i2 Technologies, in fact, was previously picked as a stock ready to run just this past September. 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 21 stocks the screen returned, here are three that are still attractively priced, but which investors think are ready to run today:


CAPS Rating Oct. 5, 2009

CAPS Rating Jan. 5, 2010

Trailing 4-Week Performance

PE Ratio

GSI Technology (NASDAQ:GSIT)





Petrobras Energia (NYSE:PZE)





Powell Industries (NASDAQ:POWL)





Source: Motley Fool CAPS Screener; price return from Dec. 11 to Jan. 4.

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.

GSI Technology
Semiconductor manufacturer GSI Technology says its two new SRAM products will perform 50% faster than similar chips from its closest rivals. Up till now, GSI has been a hidden opportunity. Only two Wall Street analysts follow the stock and less than 100 CAPS members have rated it. Yet those that have taken note are steadily upgrading their opinion, and 87% now believe the chipmaker will outperform the market. It's in such underfollowed companies that investors have the best chance of discovering 2020's ten-baggers.

Petrobras Energia
At a time when ExxonMobil is selling at more than three times book value, and BP (NYSE:BP) sells for nearly twice its book, an investor can still get Petrobras Energia at a valuation lower than its net assets while enjoying a dividend currently yielding more than 4%.

That was just one of the attributes attracting highly rated CAPS All-Star member mrindependent:

Petrobras Energia Participaciones engages in oil and gas exploration, refining, distribution, and electricity production. The company has a sound balance sheet with loads of cash and the dividend yield is 4.5%. Currently available for 0.7 times book value.

Powell Industries
Listening to Powell Industries' CEO investors might be wary about jumping head first into the energy equipment manufacturer's pool. He says the water's rather shallow with much lower backlog and an economic climate offering fewer opportunities. But it also has the ability to make its own luck, adding to its power base through mergers and acquisitions, just like its purchase of PowerComm, a small service provider for oil and gas companies in western Canada that it completed last month.

FreeMortal says Powell's sturdy financial situation reminds him of a "coiled spring" ready to release:

Minuscule debt, excellent sales growth. PE, EPS, ROE, and margins are all excellent compared with its peers. (This is even after they acquired PowerComm's Canadian business.)

It appears to be a coiled spring. Looks worth hanging on to for a while.

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, 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. 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.

Try any of our Foolish newsletter services today, free for 30 days.

Fool contributor Rich Duprey does not have a financial position in any of the stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.