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 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
|
|
Agnico-Eagle Mines (:AEM)
|
111%
|
4.5%
|
****
|
|
Barrick Gold (NYSE:ABX)
|
84%
|
4.4%
|
****
|
|
Chiquita Brands (NYSE:CQB)
|
66%
|
1.5%
|
****
|
|
Helmerich & Payne (NYSE:HP)
|
54%
|
4.6%
|
*****
|
|
Sigma-Aldrich (:SIAL)
|
37%
|
2.3%
|
*****
|
Sources: Yahoo! Finance, Capital IQ, and CAPS as of March 17.
At first glance, this sure looks like a high-quality group. But, as always, I highly advise taking a close look before you throw a bounce pass in the direction of any of these stocks.
The shrinking congregation
Attendance at the church of what's working now is taking a dive. Despite recent moves by the Fed, the concerns over the struggling housing market and financial services sector -- aggravated further by the Bear Stearns (NYSE: BSC ) blow-up -- have taken the will to live out of Mr. Market. I believe he was last spotted gazing listlessly at the San Francisco Bay from the side of the Golden Gate Bridge.
But as the list above shows, stocks like Sigma-Aldrich have done very well despite the malaise in the rest of the market. The company earns its keep by selling chemicals and reagents to labs for the purposes of research, pharmaceutical development, and disease diagnosis -- probably as close to a recession-proof business as it gets. The company also benefits from a wide customer base that spanned 80,000 accounts and over one million individual customers in 2007.
Back in mid-February the company reported strong year-end results that showed revenue and earnings per share up 15% and 21%, respectively, over 2006. Gains from currency movements made up a portion of the growth and are expected to contribute a bit to this year's results as well, but management expects that they will be able to boost earnings another 8% to 12% in 2008. Stability, however, doesn't come cheap in an environment like this, and the stock currently trades at almost 24 times its trailing earnings, despite the expectation that earnings growth will be under 10% per year over the next five years.
Although only 155 CAPS players have rated Sigma-Aldrich, a handful of CAPS' All-Star players have gotten behind the stock. One of them, HelicalZz, who is ranked in the top 3% of all CAPS players, gave the stock a thumbs-up in mid-2006, saying:
[Sigma-Aldrich] sports great profitability metrics including ROE >20% and profit margin > 15%. They are buying back shares and pay a dividend @ just 1.2% but that has quadrupled in the last 10 years and doubled in the last 3. What is not to like?
So do you think Sigma-Aldrich deserves 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 a few more of the 5,000-plus other stocks that are rated on CAPS.
I think I heard a boo-yah somewhere out there -- thanks, Stuart Scott!
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