The clock's ticking down, your team's down one, you're being double-teamed, and you wouldn't have enough time to get off a good shot even if you were allowed to drop-kick both defenders. So who do you dish the rock to?
Your first thought might be the resident superstar -- the Kobe Bryant or LeBron James. But what if Kobe, as good as Kobe is, is playing colder than an Alaskan snowdrift? That's right, you dish to the guy with the hot hand, the guy who will be deemed en fuego tomorrow on ESPN.
Momentum investors are looking for stocks in a similar state of sizzle when they make investments. They want to give the nod to the stocks that are hot to the touch.
But momentum by itself will only get you so far. What sounds more interesting to me than simply looking for stocks that have momentum is finding high-quality stocks that also have some positive inertia on their side. It's like kicking the ball out to Michael Jordan or Larry Bird when they do have a hot hand.
To find these high-quality winners, I cross-referenced a pretty simple momentum screen with data from The Motley Fool's new investing community, CAPS. The result is a starting lineup of all-star stocks that all currently have a fiery shooting hand. Each of the companies below is up 30% or more over the past year, is within 5% of its 52-week high, and has been rated highly by CAPS players.
|
Stock
|
12-Month Change
|
Percent Below 52-Week High
|
CAPS Rating (out of 5)
|
|
Cisco (Nasdaq: CSCO)
|
36.0%
|
1.7%
|
*****
|
|
Hewlett-Packard (NYSE: HPQ)
|
34.2%
|
1.0%
|
****
|
|
McDermott International (NYSE: MDR)
|
95.1%
|
1.0%
|
*****
|
|
American Science & Engineering (Nasdaq: ASEI)
|
52.1%
|
1.0%
|
*****
|
|
Deere & Co. (NYSE: DE)
|
65.0%
|
0.7%
|
****
|
Sources: Yahoo! Finance, Capital IQ, and CAPS as of Sept. 3.
At first glance, this sure looks like a high-quality group. But, as always, I strongly advise taking a close look before you throw a bounce pass in the direction of any of these stocks.
Rule-making tech style
Back in mid-March, we ran a series seeking to identify the top "Rule Maker" companies out there. While there were many strong contenders to choose from -- picks from our other analysts included powerhouses like Starbucks (Nasdaq: SBUX) and Google (Nasdaq: GOOG) -- I picked Cisco as my favorite Rule Maker.
Since that series ran, Mr. Market and the timing gods have been kind, and Cisco's stock is up more than 20%. Driving this gain were market conditions that have conspired in Cisco's favor recently. While there are some very visible dark clouds in the market thanks to the real estate and mortgage industries, Cisco's business has benefited from robust demand for its array of products. In early August, the company announced results for its fiscal year that showed revenue and earnings up 23% and 31% year over year, respectively. Demand for Cisco's shares has also increased thanks to the perception of tech as a safe haven from problems in other parts of the market, particularly the financials.
This is all short-term, though, and pure luck with regards to when we published the Rule Maker series. The real opportunity for Cisco isn't simply through the end of this year or even next year, but over the long term as it continues to set the pace in the world of IT infrastructure and data exchange.
CAPS All-Star StatsGeek has a similar long-term outlook on Cisco. He thinks that Cisco's "second wave of exponential growth is coming," and he also cites the fact that Cisco's CEO, John Chambers, "is very bullish on the next 5-10 years."
So does Cisco deserve a place on your All-Star team? You can share your thoughts on it, or check out more of what your fellow Fools had to say about this or any of the other stocks above, by stopping by CAPS. And while you're there, you can also take a peek at a few more of the 4,900 other rated stocks.
I think I heard a "booyah" somewhere out there -- thanks, Stuart Scott!
More CAPS Foolishness:
American Science & Engineering is a Rule Breakers selection. Starbucks is a Stock Advisor pick. You can check out either newsletter with a 30-day free trial.
When it comes to basketball, Fool contributor Matt Koppenheffer might be the guy Ron Shelton was thinking of when he came up with the title White Men Can't Jump. He does not own shares of any of the companies mentioned. The Fool's disclosure policy has a 55'' vertical jump and can dunk from half court. Or so I hear.
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