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 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 141 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 Oct. 16 to Jan. 15.

Valeant Pharmaceuticals, in fact, was picked as a stock ready to run in 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 whose ratings had just improved to three stars or better, that sport valuations lower than the market's average, and whose prices haven't appreciated by more than 10% in the past month.

Of the 41 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 Dec. 18 to Jan. 15.

You can run your own version of this screen on CAPS; just remember that the data is 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.

Arthur J. Gallagher
Risk management specialist Arthur J. Gallagher hasn't been  able to raise prices during the recession, similar to other industry players like Marsh & McLennan (NYSE:MMC) that have also faced pressure. To make up for that, the insurance broker has made strategic acquisitions that, CAPS All-Star havoc315 says, position it for growth.

They are taking advantage of the slowed economy as a time to expand their operation, acquire competitors, etc. Always a good sign for the future.

Sealed Air
Bubble Wrap maker Sealed Air is enjoying the payoff associated with a cost-cutting program and market growth abroad. Shares of the packaging materials maker are up 50% year over year, but 82% of the CAPS community members rating it believe it will continue to outperform.

Safe Bulkers
As the Baltic Dry Index resumes its march north on increasing ore demand in Asia, dry bulk shippers like Safe Bulkers are drawing renewed interest among investors. CAPS member groron thinks agricultural products will play a bigger role.

Dry bulk shipping will become a booming business when commodities -stocks (especially grains !! ) will tend to concentrate on certain places on this planet. Crops will suffer more and more by climatic extremes. So shipping to the areas with shortages is the only solution.

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. Join me there, or let us know what you think in the comments section below.

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.