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 getting the ball out to your team's superstars when they do have a hot hand.
There's no doubt that now's a tough time to try and find winners out there, but to find the current league leaders, I ran a simple momentum screen on the Motley Fool CAPS screener. Each of the companies below was up by a double-digit percentage over the past four weeks -- despite the S&P falling double digits -- and has been rated highly among CAPS players.
|
Stock
|
Four-Week Change
|
12-Month Change
|
CAPS Rating (5 max)
|
|
Melco Crown Entertainment (Nasdaq: MPEL )
|
27.7%
|
(69.6%)
|
****
|
|
Petrohawk Energy (NYSE: HK )
|
17.0%
|
(3.4%)
|
****
|
|
Nucor (NYSE: NUE )
|
16.6%
|
(34.7%)
|
*****
|
|
Apple (Nasdaq: AAPL )
|
10.8%
|
(43.1%)
|
****
|
|
Williams Companies (NYSE: WMB )
|
10.0%
|
(44.6%)
|
****
|
Sources: Yahoo! Finance, Capital IQ (a division of Standard & Poor's), and CAPS as of Nov. 3.
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. In fact, I'll even kick off your research with a look at Melco.
Providing the pep
Halloween is over, but there are a lot of goblins running around in the markets. One of the ringleaders of this troublemaking group is debt. And boy, is he scaring the pants off investors.
In the world of casinos -- where debt usually flows like water and is used to build massive gambling resort meccas -- stocks have been hit particularly hard as investors have gotten skittish about the massive debt overhang. As of their most recent balance sheets, the debt at Wynn Resorts (Nasdaq: WYNN ) and MGM Mirage (NYSE: MGM ) was more than twice each company's equity. And the stocks of these casino giants are down 64% and 83%, respectively, over the past year.
More recently, though, as the debt markets have started to thaw a bit, investors have gotten more sanguine on debt and the casino industry in general -- helping the stocks of Wynn, MGM, and Melco recover some of their lost value.
Also giving Melco a boost was the announcement in mid-October that despite the tough market and economic conditions, it is still on schedule to open its massive City of Dreams project in Macau during the first half of 2009.
Looking ahead
It's not perfectly fair to compare Melco with Wynn or MGM. Melco didn't open its first actual casino until 2007, and for the 12 months ended in June, its revenue was a fraction of what Wynn or MGM collected. However, the company is solely focused on the hotbed of Macau, and has on the horizon the aforementioned City of Dreams project, which is expected to have 420,000 square feet of casino gaming area, multiple hotels, a theater, and 175,000 square feet of retail space -- as well as other fun-filled attractions.
On CAPS, Melco's stock is rated four out of five stars and has more than 1,000 CAPS members bullish on it. One of these Melco bulls, vitrified, recently gave the stock a thumbs-up on the potential he sees for Macau: "Macau is becoming the world's Las Vegas, and there seems to be a strong market for gambling. As Macau gets over its growing pains and the world economy gets back on track (and with it a greater appetite for risk among investors), watch for this one to explode."
Fielding your team
So do you think any (or all) of these companies deserve a place on your All-Star team? You can share your thoughts or check out more of what your fellow Fools had to say by stopping in at CAPS. And while you're there, you can also peek at few more of the 5,400 other stocks that are rated.
I think I heard a "booyah" somewhere out there -- thanks, Stuart Scott!
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