More Than Momentum: Stocks Rising for a Reason

Even on the market's worst days, headlines and ticker feeds tout soaring stocks. Some juicy rumor or biotech wonder drug seems to be reason enough for a stock to climb 10%, 25%, even 50% -- sometimes in a single day. Sometimes, the companies are familiar, but many are names and stories entirely unknown to investors.

Often, news of a buyout offer sends a stock rocketing, like Deutsche Telekom's (NYSE:DT) $1.6 billion bid for SunCom Wireless, which caused the latter's stock to rise nearly 17% in a single day. But beyond these somewhat unpredictable surges, there are stocks out there with a fundamentally compelling story behind their recent momentum. The difficulty comes in sifting through the daily trading and news-driven gyrations to find them.

Luckily, there's help right at your fingertips. Motley Fool CAPS is a great tool not only for finding and screening stocks, but also for getting a quick read on the fundamental stories behind them.

The story behind the story
Let's dig right in, using the collective wisdom of more than 65,000 CAPS investors, to look past the splashy news and find companies showing strong recent momentum.

We'll screen for stocks showing at least 30% price appreciation in the past month. Then we'll weed out stocks with less than a $100 million market capitalization and those with a beta greater than 3. Setting these limits will help keep us out of the wild, pump-and-dump land of penny stocks.

Here, then, is a broad sampling of stocks that our screen returned today.

Now let's sift further through this list of stocks that have thumped the market over the past month and find out why they've performed so well.

The method behind the madness
CAPS contains a searchable record of investors' opinions and comments about a company, as well as an overall ranking from the investing community. Lest you think this sounds like following a crowd of lemmings, note that the opinions of the best-performing investors are weighed more heavily than are those from investors who haven't done so well. Thus, a company's ranking is influenced more strongly by investors who have already proved themselves better than the average dart-throwing monkey.

Flashback
Hmmm, Doral Financial. Why does that name sound familiar? Oh, yeah, that's the company that had its stock pounded into the dirt when funny financials and an SEC investigation led to restated earnings over several years. Well, here it is today with shares more than doubling over the past month.

Following the company's 1-for-20 reverse split that got the stock out of penny land last month, Doral's stock has been flapping around faster than a moth near a heat lamp. The turmoil in the home mortgage market has had investors in and out of Doral, with boosts in confidence coming from President Bush's lender bailout plan and the Fed rate cut. News that other overexposed firms such as Luminent Mortgage were able to stay liquid with cash infusions also boosted shares. Left for dead only a few months ago, it looks like Doral has found some friends on the Street.

Flashback, part deux
It must be retro week (and I forgot my parachute pants), as another "blast from the past" resurfaces on our momentum list this week. Martha Stewart's once-favorite share toy, ImClone Systems, has been surging lately, boosted by good news that it and partner Bristol-Myers Squibb (NYSE:BMY) are finding that the cancer compound Erbitux improves the survival rate of patients in a clinical trial. Only days later, Friedman Billings Ramsey analyst Jim Reddoch downgraded the stock with a not-so-optimistic outlook on Erbitux, but shares have largely recovered as investors like the chances for success with ImClone's drug pipeline.

What's your story?
Ultimately, the only story that counts is your own. Whether you buy the story of a soaring or souring stock, your own research is more important than collective opinions. But thankfully, these collective opinions make an individual's job of due diligence much easier.

So step right up and chime in with your own take on these or any of the more than 5,000 stocks that investors have covered in Motley Fool CAPS. It's totally free to be a part of this story, and the payback is more than worth it.