When the clock's ticking down and the game's on the line, which of your teammates do you trust to sink a winning shot? Sure, you could dish the rock to your resident superstar -- but what if he's playing ice-cold at the moment? So instead, you pass to the guy with the hot hand, the one who'll be deemed en fuego tomorrow on ESPN.
Momentum investors are looking for stocks in a similar state of sizzle. But momentum by itself will only get you so far. I prefer to find high-quality stocks that also have some positive inertia on their side. It's like kicking the ball out to your team's superstars when they do have a hot hand.
To find these league-leading winners, I cross-referenced a simple momentum screen with data from The Motley Fool's CAPS investing community. Each of the companies below is up 30% or more over the past year, now trades 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
|
|
Diamond Offshore (NYSE: DO)
|
66%
|
3.2%
|
*****
|
|
Rofin-Sinar Technologies (Nasdaq: RSTI)
|
58%
|
4.0%
|
*****
|
|
Activision (Nasdaq: ATVI)
|
57%
|
1.8%
|
*****
|
|
Merck (NYSE: MRK)
|
40%
|
3.1%
|
****
|
|
Stryker (NYSE: SYK)
|
35%
|
2.6%
|
*****
|
Sources: Yahoo! Finance, CapitalIQ, and CAPS as of Dec. 18.
At first glance, this sure looks like a choice group, with four out of the five stocks holding CAPS' top rating. But as always, I highly advise taking a closer look before you throw a bounce pass in any of these stocks' direction.
Contain your excitement
Let's be frank here -- the most fun investment successes are those that draw "ooohs" and "aahhs" at a cocktail party. Apple (Nasdaq: AAPL), for instance, has been an absolute beast, more than doubling over the past 12 months. And if you bring it up in a crowd, you can keep everyone interested in how you stuck tirelessly by the iPod, iPhone, and the Mac.
Not all great investment ideas are quite as much fun to talk about -- but that doesn't make them any less profitable. Take Hidden Gems recommendation Rofin-Sinar, for instance. The company makes lasers, but not the exciting kind that you can use to blow up aliens that are trying to take over Earth. Instead, these are industrial lasers for applications like precision cutting, welding, creating perforations, and marking. (Not exactly the stuff of Hollywood blockbusters.)
The yawn factor of Rofin, however, doesn't make its 58% gain in the past year -- or its 1,000%-plus gain over the past five years -- any less sweet. The past month in particular has been a good one for the stock, after the company announced strong fourth-quarter earnings, a stock buyback, and a stock split. Stock splits, as many Fools know, really don't do anything to the intrinsic value of the company. But they still seem to put some short-term momentum behind a stock all the same.
CAPS All-Star MArgersinger is one of the 944 Rofin bulls on CAPS. He notes the company's strong balance sheet and good cash flow generation, and highlights that "the diversified nature of the company's customer base promises correlation with the growth in the global economy."
So does Rofin 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 it or any of the other stocks above, by stopping by CAPS. And while you're there, you can also take a peek at few more of the 5,000 other stocks that are rated on CAPS.
I think I heard a boo-yah somewhere out there -- thanks, Stuart Scott!
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