3 Stocks Bucking the Downtrend

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 insurer XL Capital rose 35% on Friday, despite the company's disclosure of surging investment losses. Overall, the stock has fallen 70% this month.

But beyond less-predictable events like that 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 members' 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 115,000 CAPS members 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 10% 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 Sept. 12 through Oct. 10.

CME Group
No matter what the market, there are always companies making money in the middle. CME Group is a holding company that owns the Chicago Mercantile Exchange and the Chicago Board of Trade, where many options and futures are traded. A highly rated growth stock, CME Group had its second-highest-volume month ever in September; it averaged 15.7 million contracts per day, up 18% from year-ago levels, and up 44% from the previous month.

As a major counterparty for credit default swaps (CDS), Lehman Brothers' collapse has led to a call for more transparency for the derivatives, which are traditionally traded over-the-counter. In order to provide a more formal and regulated exchange, CME Group announced that it will partner with Citadel Investment Group to create a CDS platform. Exchange competitor InterContinentalExchange (NYSE: ICE) said it will develop its own platform as well, in hopes of capturing a piece of the market that has fueled Wall Street's current nightmare scenario.

A report earlier in the year from BusinessWeek also ranked CME Group among companies like Google and Goldman Sachs (NYSE: GS) as a top 50 best performing company in the S&P 500, using criteria like average return on capital and growth over the past 36 months. Many CAPS members agree that CME is a good bet, since more than 93% of the 654 players rating the company believe it will outperform the market.

Royal Gold
The recent bailouts and added money from the government have raised the spectre of inflation once again, and many investors have taken the recent government actions as simply one more reason to invest in gold or gold producers. Royal Gold acquires and manages interests in gold mining properties of other companies, generating strong cash flow from royalties, and maintaining high margins by avoiding the rising cost structures that miners are experiencing in the current environment.

Royal Gold has a business model similar to Silver Wheaton (NYSE: SLW), but without taking delivery of the physical metals. The company also helps out miners by providing a means to capital that could be used for debt or funding other projects in a tight credit market. For instance, Royal Gold recently paid $150 million to Barrick Gold (NYSE: ABX) in exchange for a royalty portfolio consisting of 72 properties at various stages.

Royalty revenue has risen sharply for Royal Gold, and its fiscal fourth-quarter profit jumped 39% to $7.9 million, from $5.7 million a year ago. The recent volatility in gold prices has some investors uncertain about future growth for Royal Gold, but more than 90% of the 276 CAPS members rating the company still expect it to outperform the market.

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 5,400 stocks that our 115,000-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.

In the coming weeks, Fool co-founder David Gardner and his Motley Fool Pro team will invest $1 million in a portfolio designed to help you make money in any market. The service, which just launched, will rely heavily on proprietary CAPS "community intelligence" data to establish long and short positions in a broad range of securities, including common stocks, publicly traded put and call options, and exchange-traded funds (ETFs). To learn more about Motley Fool Pro and receive a private invitation to join, simply enter your email address in the box below.