More Than Momentum: Stocks Rising for a Reason

Even on the market's worst days, buyout news and other short-term forces can send individual stocks up by 10%, 25%, even 50%.

For example, when GlaxoSmithKline (NYSE: GSK) offered $750 million for drug developer Sirtris Pharmaceuticals (Nasdaq: SIRT) last week, the target company's stock jumped a whopping 82% in a single day.

But beyond one-time blips like this are stocks with fundamentally compelling reasons for recent momentum. The trick is to find those stocks. That's where Motley Fool CAPS comes in.

The story behind the story
CAPS is no crowd of lemmings. Its best-performing investors' opinions do more to shape each company's rating than the picks of their poorer-performing peers. Let's use the collective wisdom of more than 100,000 CAPS investors to filter out the noise and find companies offering strong momentum.

We'll screen for companies with a stock price increase of at least 30% in the past month, a market cap of greater than $100 million, and a beta of less than 3. That'll keep us clear of the wild, pump-and-dump land of penny stocks.

Here's a sample of stocks our screen returned:

Let's burrow down through this list of stocks that have thumped the market in the past month and find the story behind the numbers.

Ship shape?
Shipping stocks have been somewhat like the wind that blows against them -- or with them -- out on the open sea. Both DryShips and Excel Maritime each soared more than four-and-a-half times in value in 2007 before the pricey stocks yielded under selling pressure and returned a good portion of those gains in the past six months.

After suffering with the rest of market for months, optimism for increased premiums in shipping rates blossomed in early April and turned the entire fleet of shipping stocks north again. But DryShips has been up to more than just shipping -- the bulk carrier decided to diversify strategy and took a dive into the deepwater drilling segment late last year, buying a $405 million stake in Ocean Rig.

Since then, DryShips has increased its stake in Ocean Rig and will commence a tender offer for the whole shebang -- lock, stock, and drill bit. DryShips isn't wasting time in the deepwater segment, either -- the company has already announced an agreement to buy two ultra-deepwater drill ships at a mere $800 million a pop.

DryShips stock has climbed higher as the new plans unfold, with investors obviously enthused about the possibility of profiting immensely from an industry undergoing dramatic expansion. But significant financial commitments on a leveraged balance sheet have some investors scared, and as such, DryShips maintains a below-average two-star rank in CAPS. Overall, 24% of the 1,958 investors rating the company hold a bearish stance and think the general market will perform better than DryShips in the future.

Fast cash
Another sector known for volatility -- that of payday lenders offering high rate, short-term loans -- has also been seeing more green lately. Pawn shop operator and loan maker First Cash Financial has been trading higher since it stepped up to the plate in mid-March and tripled its share repurchase authorization by adding two million shares on top of the original one million share authorization late last year.

Investor optimism even helped First Cash power beyond news of more oppressive legislation designed to shut down payday lenders, this time coming from Arkansas. It followed up just last week with a first-quarter earnings report and outlook that was better than analysts had expected from a company heavily exposed to bad debt in today's economy. With profits still flowing in a tough market, CAPS investors still strongly support First Cash, with 97% of the 577 investors rating the company believing the stock will beat the market.

What's your story? Whether you buy the tale of a soaring or a souring stock, your own research is more important than collective opinions. But these collective opinions can make your due diligence a whole lot easier.

Add your take on these or any of the 5,600 stocks that our 100,000-plus investors have covered in Motley Fool CAPS. It's totally free to be a part of the community, and the payback is more than worth it.