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 43 stocks when I ran it, no doubt reflecting the market's continued recovery during that time, and included these recent winners:

Source: Motley Fool CAPS Screener; trailing performance from April 1 to July 2.
CAPS rating = one to five stars.

Qwest Communications, in fact, was previously picked as a stock ready to run in April. 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. So 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 60 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 June 4 to July 2.
CAPS rating = one to five stars.

You can run your own version of this screen over on CAPS; 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.

Analog Devices
In the wake of Intel's (Nasdaq: INTC) big earnings report yesterday, Analog Devices might just continue its own upward trajectory. The supplier of analog and DSP integrated circuits has enjoyed strong demand for its products in both the industrial and automotive markets, and consumer markets should help keep things moving.

The CAPS community agrees, with 91% of the more than 300 members who have rated the tech specialist tagging it to outperform the broad market averages. Devise an opinion on this leader and let us know on the Analog Devices CAPS page how you think the Intel earnings report will impact it.

CIGNA
Despite CIGNA's strong balance sheet, bolstered by better influences from its insurance business as well as international contributions, the ratings agencies are concerned that economic and financial changes could impact earnings and affect its ability to service its debt. Fitch Ratings says CIGNA's financial strength gets an "A," but its debt gets a "BBB."

CAPS member kthibs thinks large insurers like CIGNA, which sports an $8.7 billion market cap -- putting it ahead of Coventry Health Care (NYSE: CVH) and Humana -- will fare poorly in the future while smaller shops prosper: "Large Health insurers are going to struggle and smaller and newer companies emerge offering cost savings and innovative price/ service strategies."

W.W. Grainger
Considering the ISM manufacturing index remains above 50, meaning it's in expansion mode (and has been for 11 straight months), industrial suppliers like W.W. Grainger and MSC Industrial Direct (NYSE: MSM) are looking for their business to expand, too. Highly rated CAPS All-Star thievaryx sees this as an opportunity for Grainger to capture more share:

Still a mid-cap stock with a very low market share. Excellent business growth potential that is performing very well.

Management is very shareholder friendly (dividend achiever) and commitment to repurchasing shares (about 5% of OS anually)

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 whether you think these or any other stocks are starting to rev their engines.