More Than Momentum: Stocks Rising for a Reason

Even on the market's worst days, buyout news or other short-term forces can send individual stocks up by 10%, 25%, even 50%. For example, when AIG (NYSE: AIG  ) agreed to pay $1.5 billion for the U.S. consumer finance operations of Popular (Nasdaq: BPOP  ) , stock in the Puerto Rican bank jumped more than 40% the following week.

But beyond one-time blips like this are stocks with compelling reasons for their recent momentum -- provided you can find them. 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. So, let's use the collective wisdom of more than 83,000 CAPS investors to filter out the noise and find companies showing 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 sampling of stocks our screen returned:

Company

CAPS Rating
(Out of 5)

1-Month
Price Change

MiddleBrook Pharmaceuticals (NASDAQ:MBRK)

**

154%

Idenix Pharmaceuticals (NASDAQ:IDIX)

**

102%

Star Scientific

*

124%

Pulte Homes (NYSE:PHM)

*

44%

Amrep (NYSE:AXR)

*

37%

Return data is calculated as the difference between the closing price on Dec. 28 and the closing price on Jan. 29, as per MSN Money's screen. Star ratings from Motley Fool CAPS. Data as of Jan. 29.

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

Double whammy
It's not too hard to see why investors would turn their nose at Amrep and give it a lowly one-star rating -- two of the New Jersey company's business lines are real estate and print media, areas that investors have abandoned lately.

Its real estate operations are largely based on selling residential and commercial lots in Rio Rancho, New Mexico, where it owns roughly 17,000 acres. Stock in Amrep soared in the past few years as the price per acre in Rio Rancho jumped from $37,900 in 2005 to $63,200 in 2006 and $91,200 in 2007.

But as the high times in real estate eased, Amrep has similarly felt the brunt of a declining housing market. On top of this, the area's largest employer, Intel (Nasdaq: INTC  ) , started slashing jobs last year, more than 1,000. As a result, stock in Amrep has shed nearly 60% in the past year as land sales plummeted -- and that includes the recent 37% bounce back up.

Amrep's bounce up in the past month comes on no news other than an insider purchase -- Director Nick Karabots took advantage of the low price to buy $375,000 worth of company shares.

Some CAPS investors think the housing drama will continue to play for an extended period, continuing to devalue Amrep's assets in the process. Even with the stock price reduction, only 147 of the 231 investors rating the company in CAPS think it will beat the market going forward. All-Star investors are even more bearish, with 66% of them voting for Amrep to lag the S&P going forward.  

Upon this house
Homebuilders like Pulte Homes have seen renewed interest in their beaten-down stocks lately. When the Fed steps in to cut rates, and tiny bits of news -- such as an increase in mortgage applications -- some investors feel renewed hope. But there's still an extensive supply of new homes that won't be picked up by consumer demand anytime soon. The purchasing power of the average American is expected to go into a prolonged decline.

Many think the housing mess is still in its early stages of unwinding. CAPS investors agree, remaining largely bearish on Pulte Homes. Some bulls are bottom-fishing for a long-term turnaround, but 619 of the 922 investors rating Pulte still believe the homebuilder will lag the S&P going forward.

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 make an individual's due diligence easier.

Step right up and add your own take on these or any of the more than 5,300 stocks that 83,000-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.


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