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
|
CAPS Rating
|
|
Fording Canadian Coal Trust (NYSE: FDG )
|
185%
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****
|
|
CONSOL Energy (NYSE: CNX )
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135%
|
****
|
|
Innophos Holdings (Nasdaq: IPHS )
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111%
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****
|
|
GrafTech International (NYSE: GTI )
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74%
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*****
|
|
Pioneer Natural Resources (NYSE: PXD )
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53%
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*****
|
Sources: Yahoo! Finance, CapitalIQ, and CAPS as of June 9.
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.
Steeling a glance at GrafTech
If you've followed this column week after week, you've likely noticed that natural resource companies -- particularly in the energy sector -- have been playing a prominent role among stocks with momentum.
This week's no different; we've got Fording Canadian Coal Trust up there, which has been soaring thanks to strong prices for metallurgical coal, and CONSOL Energy, which has been benefitting from coal on the steam side. Pioneer Natural Resources hasn't been too shabby either, thanks to its performance finding and extracting oil and natural gas while prices have been skyrocketing.
My favorites, though, are the companies like GrafTech that have been quietly tapping into booming markets. GrafTech makes specialty graphite products, primarily for the steelmaking industry. Roughly 80% of the company's revenue comes from providing graphite electrodes for use in electric arc furnaces (EAF), which are used for melting scrap and other materials to make steel. These electrodes are consumed in the process of producing steel -- generally in eight to ten operating hours -- so GrafTech's sales are largely driven by how much steel is being produced by its customers.
Fortunately for GrafTech, the global market for steel has been booming, and that has meant great results for the company. When it announced earnings back in early May, it revealed 27% year-over-year revenue growth and expanding margins that led to a 66% jump in operating income.
And if you want an extra driver for the company, a smaller part of its business sells specialty graphite products into other booming markets such as solar and oil and gas exploration.
On CAPS, there are a lot of smiles for GrafTech. Of 546 players that have rated the stock, 539 have called it an "outperform." One of these GrafTech fans, CAPS All-Star StocksRookie, recognized that GrafTech has its finger in a lot of exciting markets. Back in April he gave the stocks a thumbs up and said,
This is pin action on steel, solar, oil and gas exploration. What a stock! Just check out the profile on Yahoo!Finance. These guys are into everything that's hot right now.
So do you think any (or all!) of these companies 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 5,700-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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