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 35 stocks when I ran it, no doubt reflecting the market's turmoil during that time, and included these recent winners:
CAPS Rating March 9, 2012
CAPS Rating June 8, 2012
Central Garden & Pet
Source: Motley Fool CAPS Screener. CAPS rating = out of five stars. Trailing performance from June 1 to Aug. 31.
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 49 stocks the screen returned, here are three that are still attractively priced, but that investors think are ready to run today:
CAPS Rating June 8, 2012
CAPS Rating Sept. 7, 2012
American International Group (NYS: AIG)
Sauer-Danfoss (NYS: SHS)
Sirius XM Radio (NAS: SIRI)
Source: Motley Fool CAPS Screener. CAPS rating = out of five stars. Ttrailing performance from Aug. 3 to Aug. 31.
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.
American International Group
Like General Motors, insurance giant American International Group has been a ward of the state, with the government owning some 92% of the company at one point. But unlike its ownership interest in the carmaker, Uncle Sam's insurance stake has been profitable, and over the weekend the Treasury Department announced it was selling $18 billion of AIG's stock in a public offering. This marks the fifth time it will be unloading shares.
Highly rated CAPS All-Star latimerburned, for one, is glad to see the government getting out, saying that at last the insurer can focus once again on long-term shareholders. Unfortunately for Government Motors, though, it still has other masters besides its investors.
Shares of pump and valve maker Sauer-Danfoss have lost a quarter of their value after hitting 52-week highs earlier this year. With almost two-thirds of its revenues coming from international markets --more than that realized by rivals like Eaton (NYS: ETN) and Parker-Hannifin -- its operations have been in turmoil as Europe tries to gain control of its financial house. Its rivals have bounced back strongly from their summer doldrums and find themselves just 9% and 7%, respectively, below their high points.
A comeback of its own is seemingly difficult at this point for Sauer-Danfoss. Its CEO resigned effective Oct. 5, and his replacement will watch over operations from Germany. Moreover, the global PMI index recorded its third straight monthly stay in contraction territory (as did the U.S. index), meaning business is feeling the economic pinch more acutely. But a fresh set of eyes could be what S-D needs, and I've rated it to outperform the market indexes.
Sirius XM Radio
With Liberty Media poised to take control of Sirius XM Radio, the possibility it will get used for John Malone's own tax purposes grows closer to reality. Yet even if it is ultimately spun off once more, it still remains a solid entertainment provider, a far cry from the financial shambles it was a few years ago. Although it has competition from music services such as Pandora (NYS: P) and Spotify, the benefit of Sirius is that it's more than just music: There's talk, sports, and specialty programming, too. With the satellite radio provider being a staple in many vehicles today (my new tricked-out Ford F-150 Lariat comes with a six-month trial), it's getting a built-in audience that will continue to grow, something Internet-only music providers or iTunes wannabes can't match.
Tell me in the comments section below whether you agree Sirius's stock is one that investors ought to tune in to.
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The article 3 Stocks Set to Soar originally appeared on Fool.com.
Fool contributorRich Dupreyholds no position in any company mentioned.Click hereto see his holdings and a short bio. The Motley Fool owns shares of Ford Motor.Motley Fool newsletter serviceshave recommended buying shares of Ford Motor, General Motors, and American International Group.Motley Fool newsletter serviceshave recommended creating a synthetic long position in Ford Motor. The Motley Fool has adisclosure policy. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.
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