3 Stocks Set to Soar

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 just 53 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 18 to Aug 17. CAPS rating 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 50 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; trailing performance from May 18 to Aug 17. CAPS rating out of five.

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.

Body Central
The central thesis for investing in women's clothing retailer Body Central is that it's a turnaround in progress. Its stock got slammed last quarter after posting disappointing results and cutting guidance as it had to discount wide swaths of inventory to get it off the racks. Like rival Wet Seal, which also suffered from falling same store sales, Body Central is having a difficult go of it in an economy where consumer spending is constrained.

It has a new CEO, but they'll have to bring in a few more people since the person stepping into the position has also been serving as executive VP, CFO, and treasurer. That's a lot of hats to wear. But at less than eight times earnings estimates, Body Central looks cheap and its enterprise value trades at around 10 times its free cash flow making it an interesting stock now that it has lost three-quarters of its value.

Diamond Foods
Nut grower Diamond Foods is another stock that's lost significant value, falling more than 80% from its 52-week highs, but it brought on its woes itself by making improper payments to walnut growers. The resulting imbroglio caused the ouster of its CEO and CFO, tarnished its reputation, and ruined its chance of becoming a snack food powerhouse. It had been poised to buy Procter & Gamble's (NYS: PG) Pringles division, but the scandal allowed Kellogg (NYS: K) to step in and snatch the snack food purveyor away.

With the board of directors and the new management team seeking to put the company back on a solid footing, I think we may see it go up from here, though the possibility of it being dead money for the rest of the year remains high.

IAMGOLD
Having lost "only" half its value, IAMGOLD seems a veritable high-flying stock compared to Body Central and Diamond Foods, but the gold miner does have factors weighing in its favor that could make it the better bet of the three. In its recent second-quarter earnings report, the Canadian gold company said profits slipped 29% from the year-ago period as higher mining costs weighed on performance. But it also noted it realized higher prices for gold and recorded higher gold sales. Revenues jumped 19% as a result. With a new acquisition under its belt, expansion under way elsewhere, and increased production in the future with favorable cash costs in the mix, I think IAMGOLD will be golden, as does CAPS All-Star Schimmyboy, who finds its low P/E ratio attractive.

Three for free
Let me know in the comments box below if you agree these stocks are a good value and ready to make their move. I'm heading over to CAPS to mark them to outperform the broader averages, so join me there. But if you think IAMGOLD has a promising future, then you'll want to check out the tiny gold miner The Motley Fool has dug up that it thinks will dig up massive profits. Download the free report today to find out how to profit from this little known company, but do it today because it can't stay hidden 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. Motley Fool newsletter services have recommended buying shares of Procter & Gamble. The Motley Fool has a disclosure 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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