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 just 37 stocks when I ran it, no doubt reflecting the market's turmoil during that time, and included these recent winners:
CAPS Rating 12/28/11
CAPS Rating 3/28/12
Trailing 13-Week Performance
Select Medical Holdings
Cabot Oil & Gas
Source: Motley Fool CAPS Screener; trailing performance from March 30 to June 28.
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 18 stocks the screen returned, here are three that are still attractively priced, but which investors think are ready to run today:
CAPS Rating 3/28/12
CAPS Rating 6/28/12
Trailing 4-Week Performance
Basic Energy Services (NYS: BAS)
Huntington Bancshares (NAS: HBAN)
USA Mobility (NAS: USMO)
Source: Motley Fool CAPS Screener; price return from June 1 to June 28.
You can run your own version of this screen over on CAPS; just remember that the data is 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.
Basic Energy Services
Well servicing specialist Basic Energy Services looked like it was poised to turn things around as May's numbers showed significant improvement: Drilling rig days for the month were 357, generating rig utilization rates of 96%, better than the 89% posted the month before and the 81% in year-ago period. But it also noted that while its well servicing rig hours increased, the utilization rate fell from April, though it was still above last year's rate.
A combination of deteriorating market conditions, falling prices for oil and natural gas liquids, and weakness in its pricing power caused it to reduce EBITDA guidance to slightly below first-quarter results. But insiders have consistently bought the company's stock as the price has fallen, with one director buying almost a half million dollars worth this week alone.
The natural gas glut is weighing on the stock, but 92% of the CAPS members rating it agree with the insiders purchasing stock that it will ultimately bounce back. You can add Basic Energy's stock to the Fool's free portfolio tracker if you think it can climb the mountain of worry that has cut the stock in half in 2012.
Despite having to push against the tide of Federal Reserve policies, regional banking specialist Huntington Bancshares still managed to report a first-quarter profit 21% higher than a year ago as loan-loss provisions were slashed 54% from last year (and 12% lower form the fourth quarter), and commercial and industrial loans grew 17%. It even saw demand deposits rise 16% on an annual basis.
That puts the regional banking specialist ahead of the big banks. A recent Bloomberg report found that the four largest banks -- JPMorgan Chase, Bank of America (NYS: BAC) , Citigroup (NYS: C) , and Wells Fargo -- saw total loans decline almost 5%. The lending void created by the big banks is getting filled by regionals like Huntington.
Huntington has also seen insiders buying this year, and at prices higher than where it currently trades, which is enough for CAPS member MakeEasyMoney365, who rates the regional bank to outperform the market averages. But let us know on the Huntington Bancshares CAPS page if you'd deposit its stock in your account.
OK, I'll have to admit some surprise when USA Mobility bubbled to the top in the screen -- I was surprised it was still around. While somewhere in my brain, I know that some people and professions still rely on paging services, it's not exactly a growth industry. But USA operates the largest one-way paging and advanced two-way paging networks in the country, which are primarily utilized by health care professionals.
Considering that other wireless forms of communication such as smartphones can also handle paging services, the need for a stand-alone pager is in serious decline. USA Mobility must be viewed as a "cigar butt investment," one you'll take a last few puffs of before you toss it in the gutter, where you picked it up.
Yet there actually are still some opportunities before you flick the ash off. USA sees expansion potential in international market hospitals, so don't write it off just yet. It's definitely a sleeper stock: It excels at what it does, but its market is shrinking so rapidly that this can't be considered a long-term play unless it devises some way to make its services and software critical for its customers. It does have a 99% renewal rate for its software services, so there's some stickiness to what it offers, and paying a dividend yielding 8% accounts for something.
Tell us on the USA Mobility CAPS page or in the comments section below if you think this old stogie is worth a shot.
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, and if you like USA's dividend, check out this free report on "The 3 Dow Stocks Dividend Investors Need." You can read it for free, but hurry, because it won't be around for long.
The article 3 Stocks Set to Soar originally appeared on Fool.com.
Fool contributor Rich Duprey holds no position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool owns shares of Citigroup, JP Morgan Chase, Bank of America, and Huntington Bancshares In. The Fool owns shares of and has created a covered strangle position in Wells Fargo. Motley Fool newsletter services have recommended buying shares of Wells Fargo. The Motley Fool has adisclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.
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