3 Stocks Ready to Roar

There are plenty of strategies for picking stock winners, from finding low price-to-earnings ratio 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 just 67 stocks when I ran it, no doubt reflecting the market's turmoil during that time, and included these recent winners:

Source: Motley Fool CAPS Screener; trailing performance from May 21 to Aug. 19.

W.R. Grace, 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. 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 71 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 Jul 23 to Aug. 19.

You can run your own version of this screen over on CAPS. Just remember that the data are 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.

Atmos Energy
Asset optimization can be a useful tool for natural gas utilities like Atmos Energy and Piedmont Natural Gas (NYSE: PNY), but as the past nine month shows for Atmos, it can affect results when trades don't go their way. Pipeline and storage profits sank $4.1 million because of optimization strategies, but the utility still holds bright prospects. Core operations in the latest quarter were solid and topped expectations with earnings coming in at $0.09 a share. Analysts had forecast the company would just break even.

CAPS member 757piolet has been expecting natural gas prices to rally to also boost Atmos' bottom line, and 87% of the CAPS members rating the utility apparently agree as they've indicated it will continue to post market-beating results. With summer fading and the heating season approaching, tell us on the Atmos Energy CAPS page whether you think investors should hedge their bets.

Lubrizol
Oil additive maker Lubrizol has bucked the trend of a slowing economy, which has caused the consumer market for motor oil to flatline or even decline. Ashland's (NYSE: ASH) Valvoline division, for example, saw 5% higher sales but suffered a 30% drop in operating profits. Lubrizol, on the other hand, was able to score a 26% jump in sales generating a 50% surge in net earnings. The additives maker not surprisingly also raised guidance for the full year, well ahead of expectations.

With 92% of the CAPS members rating Lubrizol to outperform the market, it seems like they see a slick opportunity here.

Veeco Instruments
Investors have been warming up to LED equipment technology specialist Veeco Instruments. CAPS member Fool4Life30 says despite getting caught up in the sector's sell-off following Cree's (Nasdaq: CREE) earnings report, it's still a candidate for beating the market. The surprising thing is that Cree actually beat analyst expectations for its fourth quarter, but the market was worried that first-quarter revenues were anticipated to be soft even though Cree's profits would come in ahead of forecasts.

With Veeco's hand in solar and data storage, a particularly hot sector in light of the acquisitions under way in tech, it looks like it will be able to light up future growth regardless. That's why aminorexx is looking for a third-quarter surprise: "increasing revenue, bookings, earnings, massive growth continues in q3."

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.

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