More Than Momentum: Stocks Rising for a Reason

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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 largely unknown among investors.

News of a buyout offer often sends a stock rocketing. That's what happened when Philips (NYSE: PHG) offered $2.7 billion in cash for Genlyte (Nasdaq: GLYT). Genlyte's stock jumped more than 50% in a single day on the news. But beyond these somewhat unpredictable surges, there are stocks with fundamentally compelling stories 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 for not only finding and screening stocks, but also getting their background information.

The story behind the story
Let's dig right in, using the collective wisdom of more than 75,000 CAPS investors to look past the splashy news and find companies showing strong recent momentum.

We'll screen for stocks showing at least 20% 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 of greater than 3. Setting these limits will help us steer clear of the wild, pump-and-dump land of penny stocks.

Here's a broad sampling of stocks our screen returned today.

Company	CAPS Rating (Out of 5)	1-Month Price Change
WellCare Health Plans (NYSE: WCG)	***	30.6%
Pericom Semiconductor (Nasdaq: PSEM)	***	31.8%
Millennium Pharmaceuticals (Nasdaq: MLNM)	**	26.3%
Pharmion (Nasdaq: PHRM)	*	31.2%
Genitope (Nasdaq: GTOP)	*	35.2%

Data from MSN Money. Star ranking from CAPS. All data as of Nov. 27.

From this list of stocks that have thumped the market over the past month, let's dig deeper into WellCare, and find out why it's performed so well.

The method behind the madness
CAPS contains a searchable record of its investors' opinions and comments about a company, as well as an overall ranking from the entire investing community. Lest you worry about following a crowd of lemmings, note that the opinions of the best-performing investors are weighted more heavily than those from poorer-performing participants. Thus, a company's ranking is influenced more strongly by investors who have proved themselves better than the average dart-throwing monkey.

All's well...or is it?
It's been quite a few months for investors of WellCare. Until last month, the stock had risen more than 400% in a little more than three years. But the party really turned ugly late in October, when the managed care provider got a knock on the door from a few hundred federal and state agents in a raid on its headquarters. When the dust had settled, WellCare's stock had plummeted more than 80% in only a few days. Details of the raid, and what information authorities were after, has still not been officially provided by the company, the state, or federal authorities.

In the meantime, many news organizations have launched their own investigations, with some looking into the past of senior management. Wall Street analysts covering the company have expressed a range of opinions on investigation's outcome as well, leaving a dark cloud hanging over the company. Despite impressive reported growth in the most recent quarter, questions of value remain.

Even with the uncertainty hanging over WellCare, though, investors bid the stock back up more than 30% in the past month, on speculation that the probe's impact is overblown. CAPS investors are split on WellCare as well, but many are bullish, given that the company's trading just above cash value. Of the 344 CAPS investors rating the company, 310 still believe that the company will shine again and beat the S&P going forward.

What's your story?
Ultimately, the only story that counts is your own. Whether you buy the story of a soaring or a souring stock, your own research is more important than collective opinions -- but CAPS' insights can make that due diligence much easier.

So step right up and chime in with your own take on these or any of the more than 5,200 stocks investors have covered in Motley Fool CAPS. It's totally free to be a part of the service, and the payback is more than worth it.