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:
| Stock | CAPS Rating Aug. 9, 2012 | CAPS Rating Nov. 9, 2012 | Trailing 13-Week Performance |
|---|---|---|---|
| Nautilus, Inc. (NYSE:NLS) | ** | *** | 95.4% |
| Vitran Corporation, Inc. (USA) (NASDAQ:VTNC) | * | *** | 47.5% |
| Canadian Zinc | ** | ***** | 47.2% |
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:
| Stock | CAPS Rating Nov. 9, 2012 | CAPS Rating Feb. 8, 2013 | Trailing 4-Week Performance | P/E Ratio |
|---|---|---|---|---|
| Kohl’s Corporation (NYSE:KSS) | ** | *** | 9.5% | 10.8 |
| Stamps.com Inc. (NASDAQ:STMP) | ** | *** | 5.3% | 10.9 |
| Yongye International Inc (NASDAQ:YONG) | ** | *** | (6.7%) | 4.6 |
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.
Kohl’s Corporation
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, Inc. (NYSE:M) at 11.7% and Nordstrom, Inc. (NYSE:JWN) 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.
