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 investors marked up before their share prices rose over the past three months. My screen returned just 45 stocks when I ran it, no doubt reflecting the market's turmoil during that time, and included these recent winners:
CAPS Rating, 2/27/12
CAPS Rating, 5/28/12
Trailing 13-Week Performance
American Railcar Industries
Source: Motley Fool CAPS Screener; trailing performance from June 1 to Aug. 27.
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 48 stocks the screen returned, here are three that are still attractively priced but that investors think are ready to run today:
CAPS Rating, 5/28/12
CAPS Rating, 8/27/12
Trailing 4-Week Performance
Anworth Mortgage Asset (NYS: ANH)
Cedar Fair (NYS: FUN)
KeyCorp (NYS: KEY)
Source: Motley Fool CAPS Screener; trailing performance from Aug. 1 to Aug. 27.
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.
Anworth Mortgage Asset
I'll admit I'm one of those who thinks there's still a lot more pain coming in the housing market, yet there are some compelling reasons the industry may have bottomed. And if that's the case, Anworth Mortgage Asset could continue being a winner. Its shares might be up a little more than 1% over the past month, but the stock has risen 13% so far this year.
Mortgage REITs borrow at low interest rates to invest in higher-yielding vehicles. Anworth mostly invests in paper backed by the taxpayer, so its risks are lower, but the Federal Reserve has been pressuring Anworth, Annaly Capital (NYS: NLY) , and other mREITs by keeping long-term rates low. But with a dividend yielding 10.7% currently, Anworth investors are still being rewarded even though mortgage rates aren't likely to rise anytime soon.
Theme-park operator Cedar Fair reported second-quarter results at the start of the month that showed revenues up 3% on a 4% increase in crowd attendance, largely because the quarter packed in an extra week than the year-ago period. Yet when you compare this year and last year on a similar 14-week basis, there was even more fun to be had, as revenues jumped 6% on a 3% increase in attendance. Yet Six Flags Entertainment (NYS: SIX) did even better, with an 11% jump in sales and with attendance rising 12% over the year-ago period.
Cedar Fair has been running higher, rising 53% since the start of the year and almost doubling from the year-ago period. But with August the peak month for vacations and a third of its season still before it, expect the theme-park operator to be a fun house of opportunity. CAPS member phiballinger figures that people who can't travel abroad or "cannot afford expensive vacations will go to local amusement parks instead." It's certainly better than a "stay-cation."
Look for KeyCorp to use the acquisition of its credit card assets as a driver of future growth. It recently obtained assets worth about $725 million along with the 400,000 consumer and business accounts of its clients, which have deposits approximately $10 billion and $5.8 billion in loans at its banks. Along with a processing agreement with MasterCard, analysts are looking for it to become a leader in debit payment solutions and processing.
Coupled with the acquisition of 37 banks from HSBC, KeyCorp has seen its business loans surge at the same time its overall loan portfolio is growing. Together, these moves should offset the costs various banking reforms imposed on banks and ought to make it an attractive investment.
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The article 3 Stocks Set to Soar originally appeared on Fool.com.
Fool contributor Rich Duprey holds no position in any company mentioned. Check out hisholdings and a short bio. Motley Fool newsletter services have recommended buying shares of Annaly Capital Management. We Fools don't 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. The Motley Fool has a disclosure policy.
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