More Than Momentum: Stocks Rising for a Reason

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, shares of United Airlines parent UAL (NASDAQ:UAUA) rose more than 68% last Tuesday, when it posted lower-than-expected losses for the quarter and announced that it could possibly increase its cash position by $1 billion over the next two years.

But beyond less-predictable events like that one, there are stocks with fundamentally compelling reasons for recent momentum. The trick is to 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 do the picks of their poorer-performing peers. Let's use the collective wisdom of more than 110,000 CAPS investors to filter out the noise and find companies offering strong momentum.

We'll use CAPS' handy stock screening tool to quickly zero in on companies with a stock price increase of at least 25% in the past four weeks, a market cap of greater than $100 million, and a beta of less than 3.

Here's a sample of stocks our CAPS screen returned:

Source: Motley Fool CAPS. Price return from June 27 through July 25.

With our list of screened stocks pulled up in CAPS, it then takes only a single click on the individual companies to get some context behind the recent momentum.

Axsys Technologies
Consumers are likely to shun high-end or big-ticket purchases these days, but the U.S. military isn't clipping any coupons for national defense. Optical-solutions manufacturer and Motley Fool Stock Advisor recommendation Axsys Technologies makes sophisticated high-tech military equipment, and like industry peer FLIR Systems (NASDAQ:FLIR), the company has boomed on the back of continued military spending during the weak economy. With its products being used in areas such as missile tracking and spaceborne surveillance, Axsys' second quarter was almost all good news, with 40% sales growth, a 53% increase in profits, and an operating margin better than 15%. More than 97% of the 521 CAPS members rating Axsys expect the company to outperform the market.

Landec
Agriculturally focused Landec makes proprietary polymers used for seed coatings and food-packaging materials to help farmers produce higher crop yields and give produce a longer shelf life. The stock has been in a protracted fall since late last year, but investors are warming up again to Landec's prospects at a cheap price. The company has a partnership with seed maker (and rocket stock) Monsanto (NYSE:MON) to coat seeds with a polymer that allows farmers to plant earlier in the season with fewer concerns about temperature changes. With its potential tied to the worldwide growth in agriculture, more than 98% of the 1,126 CAPS members rating Landec believe it will beat the S&P going forward.

EZCORP
Shares of pawnshop operator and payday lender EZCORP have surged lately, as the company cashes in on troubled economic times. Pawnshop operating income jumped 47% and payday lending increased 36% for the fiscal third quarter, despite continued political heat toward specialty finance companies. Although the regulatory battles in the payday-loan department could eventually hurt the bottom line, EZCORP continues to grow its pawnshop store count in multiple states with some acquisitions over the past year. A total of 307 CAPS members have weighed in on the company, with 94% of these bullish, while the rest see risks ahead.

Apollo Group
Education provider Apollo Group, which operates schools such as The University of Phoenix, wowed investors recently with its growing enrollment numbers in its recent fiscal third-quarter report. Student enrollment grew 11% year over year, and earnings per share grew 13%. But the operating margin is hurting as increased marketing costs and higher overall per-student acquisition costs bite into the bottom line. Apollo still hopes that bringing advertising in-house with last year's purchase of small advertising company Aptimus will improve the margin picture. CAPS members are somewhat divided on Apollo, with just shy of 92% of 547 voters rating the company bullish.

And you?
What's your story? Whether you buy the tale of a stock that's soaring or souring, 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 5,500 stocks that our 110,000-plus members 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.