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. 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 145 stocks when I ran it, no doubt reflecting the market's turmoil during that time, and included these recent winners:
CAPS Rating 8/26/11
CAPS Rating 11/25/11
Trailing 13-week Performance
US Natural Gas
Source: Motley Fool CAPS Screener; trailing performance from Dec. 2 to Feb. 27. Rating stars out of five.
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 72 stocks the screen returned, here are three that are still attractively priced, but which investors think are ready to run today:
CAPS Rating 11/22/11
CAPS Rating 2/21/12
Trailing 4-Week Performance
Air Transport Services Group (NAS: ATSG)
Internet Capital Group (NAS: ICGE)
Sauer-Danfoss (NYS: SHS)
Source: Motley Fool CAPS Screener; price return from Feb. 3 to Feb. 27. Rating stars out of five.
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.
Air Transport Services Group
The Eurozone's financial difficulties will likely continue harassing cargo transporter FedEx (NYS: FDX) , which derives 30% of its revenues from international operations, and to a lesser extent UPS, which derives less than a quarter of its revenues outside the U.S. The International Air Transport Association says global air cargo sales could slump 6% this year if the financial fires flare afresh.
By contrast, the U.S. markets are seen as a hope for all carriers, including Air Transport Services Group, which shuttles cargo around domestically. It should gain from the better prospects forecast for U.S. markets, as traffic firmed late last year.
My outperform rating for Air Transport Services Group is lagging the market, but I'm confident it will beat the indexes over the long haul. Keep an eye out for whether it takes flight by adding ATS's stock to your Watchlist.
This company invests in a focused portfolio of companies that sell software as a service, Internet marketing firms, and companies that use technology to provide outsourced services. Internet Capital Group saw revenues rise 9% in the fourth quarter. Profits surged to $0.49 per share from a penny a year ago, although that included gains from the sale of StarCite, a meetings and events manager.
However, ICG is focusing its spending on a limited number of its pipeline companies now, so first-half results may not be as strong as the second half. With 83% of the CAPS members rating ICG to outperform the broad market averages, it's apparent they believe the situation will continue to be favorable for it to realize fair prices for its investments. Let us know on the Internet Capital Group CAPS page if it's an investment you should be making, too.
Pump and valve maker Sauer-Danfoss has seen shares more than double since its low point last October, and if the rest of the industry's results are any indication, it should continue that strong upward momentum. Flowservebeat top and bottom line estimates.
While Eaton (NYS: ETN) missed on both, it's more reliant on domestic sales than the other two are, deriving 55% of its sales internationally, compared to 63% at Sauer-Danfoss and 67% at Flowserve. The diversity of markets undoubtedly plays a role in the outcome.
Some 96% of the All-Star CAPS members rating Sauer believe it will continue outperforming the market as it has, but give us your thoughts on the Sauer-Danfoss CAPS page, then add it to your Watchlist to be advised if it continues to pump up the volume.
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. The Motley Fool owns shares of FedEx and United Parcel Service.Motley Fool newsletter serviceshave recommended buying shares of FedEx. 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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