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 Allis-Chalmers Energy (NYSE: ALY) agreed to pay $438 million for oil services firm Bronco Drilling (Nasdaq: BRNC), the latter's stock jumped more than 16% in a single day.

But beyond one-time blips like this are stocks with compelling reasons for 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. 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 sample of stocks our screen returned.

Let's burrow down through this list of stocks that have thumped the market over the past month, and find out why they've performed so well.

Metal madness
Topping this week's list of momentum stocks is Canada's largest palladium miner, North American Palladium. In addition to soaring more than 50% in the past month, the company made the grade as a stock star with a highly favored five-star rating from the CAPS community.

Shares of the company have been driven higher on two main developments -- a warm reception to a secondary share offering, and the announcement of a strong fourth quarter and full year of production. North American Palladium netted $86 million from a unit offering late last year, which successfully sold its over-allotment commitments as well. Facing a dwindling cash balance, investors were heartened by the news, since the proceeds will go a long way toward supporting development of mining projects in Canada and Finland.

The new cash infusion paired nicely with the 21% increase in palladium production the company saw in 2007, thanks to increased output at its Lac des Iles mine. Similarly, the firm also saw increased output in byproduct metals such as nickel, gold, platinum, and copper last year. With shares trading at less than half of last May's price, and the company pursuing an unhedged palladium policy, many CAPS investors think that now is the time to go long on palladium. Of the 350 investors rating the company, 336 believe that North American Palladium will beat the S&P going forward.

Light at the end of the tunnel
Another stock surging this past month, Cree, owes its hot streak to renewed optimism for demand in LED lighting solutions. With government bodies around the world pushing for new levels of lighting efficiency, investors have a bullish opinion of Cree's capability to meet these demands with technology for LED lighting across a diverse set of markets.

Analysts and the mainstream press have also been shining a light on Cree and other companies in the LED supply chain lately, exposing their potential to solve energy demand issues in emerging markets. Tack onto this a blowout quarter recently announced by the company, which included a forecast for revenue to grow to between $120 million and $125 million in the next quarter, and you've got one hot stock. A solid contingent of CAPS investors like the direction of the long-term trends in lighting, collectively giving the stock a four-star rating. Of the 163 All-Stars rating the company, 147 believe that Cree will outpace 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 a whole lot easier.

Add your take on these or any of the 5,300 stocks that our 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.