Even on the market's worst days, buyout news and other short-term forces can send individual stocks up by 10%, 25%, even 50%.
For example, when Kinetic Concepts offered $1.7 billion for soft tissue product maker LifeCell
But beyond one-time blips like this one are stocks with fundamentally compelling reasons for recent momentum. The trick is to find those stocks. 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 do. Let's use the collective wisdom of more than 97,000 CAPS investors to filter out the noise and find companies offering 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:
|
Company |
CAPS Rating
|
1-Month |
|---|---|---|
|
Petroleo Brasileiro |
***** |
33.4% |
|
Peabody Energy |
***** |
44.5% |
|
SanDisk |
**** |
32% |
|
Potash |
**** |
49% |
|
Baidu.com |
*** |
68.4% |
Return data is calculated as the difference between the closing price on March 21 and the closing price on April 22, as per MSN Money's screen. Star rankings from CAPS.
Let's burrow down through this list of stocks that have thumped the market in the past month and find out the story behind the numbers.
Breaking the oversupply cycle
A little more than three months ago, memory maker SanDisk was showing its face around the turnaround saloon after a more than 50% drop in its share price from its 2007 peak. But the stock would drop even further before bouncing back up in the past month, thanks to worries about retail pressure because of what's happening in the larger economy and an oversupply in the memory market.
Oversupply is what has cut SanDisk more deeply, though, as seen in its financials for the latest two quarters. While demand for bigger memory cards has soared, the average price SanDisk has been able to command has plummeted 11% and 29% from one quarter to the next in those quarters. But news that memory peers such as Intel and Micron would cut back production eased investors' fears about further price pressure.
Knowing the cyclical nature of the memory industry, investors watching the major players are heartened that prices may be back on the upswing and that further price wars will not materialize. While some professional analysts are still making bearish calls on SanDisk, a majority of CAPS investors think the stock could beat the market. At least 93% of the 1,548 investors rating the company are voting that way.
Moving in China
As far as I can tell, no one ever said that investing in Chinese companies wouldn't be volatile. All one needs to do is look at the stock chart of recent momentum mover Baidu.com: After its stock rose more than threefold in 2007 (leading some to call it one of the best international stocks), the shares shed nearly 50% before recovering recently.
Optimism has returned to the Chinese search leader lately because it has successfully courted new senior management from other leading, multinational companies. Most recently, the general manager of Apple
A recent blowout earnings report from stateside peer Google has been a nice boost of confidence as well. CAPS investors still waiver on Baidu.com, however, with a small group of bears questioning the premium valuation given to the company. Overall, 2,450 of the 2,878 investors rating the company believe the stock will beat the market.
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 can make your due diligence a whole lot easier.
Add your take on these or any of the 5,600 stocks that our 97,000-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.
