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 179 stocks when I ran it, no doubt reflecting the market's turmoil during that time, and included these recent winners:
CAPS Rating Aug. 9, 2012
CAPS Rating Nov. 9, 2012
Trailing 13-Week Performance
Source: Motley Fool CAPS Screener; trailing performance from Nov. 9 to Feb. 8. 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 36 stocks the screen returned, here are three that are still attractively priced, but which investors think are ready to run today:
CAPS Rating Nov. 9, 2012
CAPS Rating Feb. 8, 2013
Trailing 4-Week Performance
Source: Motley Fool CAPS Screener; trailing performance from Jan. 11 to Feb. 8. CAPS rating 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.
Department stores in general had a very strong January, with many of the top names showing double-digit growth in same-store sales: Kohl's led the way with a 13.3% comp increase, but it was followed closely by Macy's at 11.7% and Nordstrom at 11.4%. The Fool's Adam Levine-Weinberg says not to be lulled into complacency with those numbers, as January is a low-volume month following a hectic Christmas shopping season and Kohl's in particular was blowing out inventory with clearance sales due to underperforming during the holiday.
Yet with analysts having anticipated only a 3.4% rise in comps and Kohl's e-commerce sales surging 59% in the month, you have to grudgingly agree it was a top-notch performance nonetheless. Compare that to J.C. Penney, which hasn't released January numbers yet but is expected to show a more than 25% decline in same-store sales, and it's easy to see that in the mid-tier department store market, Kohl's is stealing customers who would otherwise have gone to at least one of its rivals.
Some analysts think that in its weakened state Kohl's makes an attractive buyout candidate for private equity because it otherwise has solid brands and finances, so tell me in the comments box below what would be a good price for this retailer.
The U.S. Postal Service ended 2012 some $16 billion in debt and floated (again) the idea of ending Saturday mail delivery as a means of saving $2 billion annually. Such a policy, if approved, would impact not only postal carriers, but a host of businesses that still rely upon the mails (think Netflix, at least until the official demise of the DVD). Yet online stamp seller Stamps.com should see a negligible impact.
While the e-stamp seller targets both individual customers and businesses, it's the latter -- the high-volume user -- that is its true target market and arguably is more of a Monday-to-Friday customer than a weekend user anyway. Its $15.99 a month PC Postage business gives customers a free postage scale to hook up to a computer, allowing them to print out postage directly, but more important, it gives the customers discounts of as much as 63% off on Express Mail, Priority Mail, and first-class package services.
Stamps.com particularly wants to attract the small to medium-size business customer and had planned on spending 10% to 15% more to acquire such customers in 2012, and it seems to have had some success as it recorded a 19% rise in the PC Postage business in the third quarter. While the individual consumer will be put out by the post office's Saturday delivery proposal, Stamps.com should remain unaffected.
Chinese fertilizer maker Yongye International jumped in mid-October after management offered to take the company private for $6.60 a share. Scandals have marred investor confidence in Chinese stocks and led to dumping their shares on the market, which has prompted many to delist from U.S. exchanges. The Chinese government, however, got into the act by actively encouraging Chinese companies to exit U.S. markets and offering $1 billion loans to help them do so. In December, Yongye got another bounce when it was reported that the government-controlled state bank offered it financing to complete its going-private deal.
The stock still trades at a discount from the announced buyout price, probably due to doubts about whether it will actually do so, so whether you think Yongye will follow through may color your decision on whether it's at a good price to buy now or not.
And three more...
The retail space is in the midst of the biggest paradigm shift since mail order took off at the turn of last century. Only those most forward-looking and capable companies will survive, and they'll handsomely reward those investors who understand the landscape. You can read about the 3 Companies Ready to Rule Retail in our special report. Uncovering these top picks is free today; just click here to read more.
The article 3 Stocks Set to Soar originally appeared on Fool.com.
Fool contributor Rich Duprey has no position in any stocks mentioned. The Motley Fool recommends Netflix. The Motley Fool owns shares of Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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