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 176 stocks when I ran it, no doubt reflecting the market's turmoil during that time, and included these recent winners:
CAPS Rating Aug. 10, 2011
CAPS Rating Nov. 10, 2011
Trailing 13-Week Performance
Source: Motley Fool CAPS Screener; trailing performance from Nov. 11 to Feb. 9. CAPS rating is out of five stars.
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 45 stocks the screen returned, here are three that are still attractively priced, but which investors think are ready to run today:
CAPS Rating Nov. 10, 2011
CAPS Rating Feb. 9, 2012
Trailing 4-Week Performance
Altisource Portfolio Solutions (NAS: ASPS)
MasTec (NYS: MTZ)
Synopsys (NAS: SNPS)
Source: Motley Fool CAPS Screener; price return from Jan. 13 to Feb. 9. CAPS rating is out of 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.
Altisource Portfolio Solutions
Now that the banks have settled with the government in a $25 billion deal that should move the backlog of foreclosures, the housing market may get some relief and move forward again, even though it's likely to drive down home prices even further in the short run as seized properties flood the market. Altisource Portfolio Solutions is a mortgage management services provider for loan originators and loan servicers. Its largest client is Ocwen Financial (NYS: OCN) , which spun off Altisource back in 2009, and anything that helps jump-start the industry ought to benefit Altisource too down the line.
It remains largely hidden from Wall Street and Main Street, but all nine All-Star CAPS members weighing in on Altisource believe it will outperform the broad indexes. Give us your opinion of the housing market in the comments section below or on the Altisource Portfolio Solutions CAPS page, and watch the effects of the robo-signing settlement by adding the stock to your watchlist.
If there's a hidden company underpinning the nation, it's MasTec, an infrastructure construction firm that spans the energy, communication, and utility industries. MasTec provides engineering, building, installation, maintenance, and upgrade services. Its top 10 customers -- including AT&T (NYS: T) , Buffett's Mid-American Energy, and El Paso -- account for nearly three-quarters of its revenues, with Ma Bell and DIRECTV representing 47% of the total.
So while MasTec has stretched across a variety of industries, the loss of any one of them would be critical to its performance. AT&T has been selling out iPhones left and right, but it added just 717,000 net new customers last quarter, compared to over 1 million by Verizon. As a result, look to natural gas expansion for the next juggernaut from MasTec.
Add the infrastructure construction specialist to the Fool's free portfolio tracker to keep track of all that it's building.
The downturn weighing down the rest of the semiconductor industry doesn't seem evident at Synopsys, a software developer used to test and develop chips. Long story short, its shares have climbed 40% over the last six months.
It's been growing through acquisition, buying up numerous competitors that strengthen its core competencies, though it offers little in the way of diversification. That suggests it knows what it does best and is willing to play to its strengths. The only problem is, if its niche suffers a setback, it has nothing else to fall back on.
Just over 100 CAPS members have weighed in on Synopsys, and more than three-quarters believe it will outperform the market averages. I've also marked the software maker to beat the Street, but give us your thoughts on the Synopsys CAPS page, then add it to your watchlist to be alerted to any dings that might appear in its armor.
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, then check out this free report on dividend-paying stocks whose engines are all revved up. You can read it for free, but hurry, because it won't be around for long.
At the time thisarticle was published Fool contributorRich Dupreyholds no position in any company mentioned.Click hereto see his holdings and a short bio. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.
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