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.
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’s CAPS screener. Each of the companies below was up a double digit percentage over the past four weeks -- despite the S&P's loss -- and has been rated highly by CAPS players.
|
Stock
|
4-Week Change
|
12-Month Change
|
CAPS Rating (out of 5)
|
|
Archer Daniels Midland (NYSE: ADM)
|
41.5%
|
(32.4%)
|
****
|
|
NRG Energy (NYSE: NRG)
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17.2%
|
(43.7%)
|
*****
|
|
Linn Energy (Nasdaq: LINE)
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15.5%
|
(41.6%)
|
*****
|
|
Kinross Gold Corp (NYSE: KGC)
|
13.8%
|
(30.2%)
|
*****
|
|
3M (NYSE: MMM)
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11.6%
|
(25.5%)
|
*****
|
Sources: Yahoo! Finance, Capital IQ, and CAPS. Four-week price change from Oct. 17 to Nov. 14.
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 Archer Daniels Midland.
Providing the pep
In case you aren't hip to the profit potential of oilseed crushing, let me welcome you to ADM's fiscal first-quarter results. If you're not a current ADM investor, you can probably be forgiven for not knowing about oilseed crushing -- it's part of the company's processing services, which turn the likes of soybeans and sunflower seeds into oils which are eventually used for products like animal feed and salad oil. During ADM's first quarter, it greatly improved the margins that it makes on these services, and its oilseed processing operating profit jumped well over 100% from last year.
Overall, the company managed to boost revenue and pre-tax profit 65% and 131%, respectively. Some of that big gain in profit was thanks to a big credit on its inventory reserves, but even without that, the company had a quarter that probably made Lloyd Blankfein wish he had never gotten into banking (OK, he probably wishes that anyway).
Even though the sheen is clearly off the agriculture sector -- ask PotashCorp's (NYSE: POT) stockholders if you don't believe me -- these are results that you could get excited about.
Looking ahead
I don't have to do much explaining to convince CAPS members that ADM is a stock to watch. Though the stock has only garnered four out of five stars, there are still more than 1,600 CAPS members who remain bullish on it. CAPS All-Star mulledover recently gave ADM a thumbs-up, highlighting that "[Archer Daniels Midland], [Bunge (NYSE: BG)] and (the unfortunately private) Cargill are the center of the grain/seed processing trading world." Fellow CAPS member Boderat chimed in around the same time, adding:
Everyone has to eat and [Archer Daniels Midland] is the "supermarket to the world". Should be relatively immune to agricultural policy changes since [Archer Daniels Midland] is the supplier and processor rather than the farmer.
It's hard to take the opposite stance, as there's a lot to like about ADM. For one, though ethanol may not be my favorite of the alternative energy options, it seems likely that there will be a place for it in the energy mix. Pure-play ethanol companies like Aventine Renewable Energy and VeraSun have struggled mightily, and that means that ADM, which is the largest producer of fuel ethanol in the U.S., can potentially grab some more share in that market. At the same time, the diversification that ADM's other businesses provide should help the company do well even if ethanol doesn't live up to the hype.
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 have to say about these stocks, by stopping by CAPS. And while you're there, you can also take a peek at few more of the other 5,400-plus rated stocks.
I think I heard a “booyah” somewhere out there -- thanks, Stuart Scott!
More CAPS Foolishness:
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