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 in InterDigital shot up 21% in a day after it announced it would stick to its roots of licensing technology and abandon plans to enter the competitive communications semiconductor market.
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 130,000 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 35% in the past four weeks, a market cap of greater than $100 million, more than 300 active picks, and a beta of less than 3. Below are some stocks that our screen returned. You can run this screen yourself; results may change as the market changes.
|
Company
|
CAPS Rating
(out of 5)
|
4-Week
Price Change
|
|
Chesapeake Energy (NYSE: CHK )
|
*****
|
41.9%
|
|
FedEx (NYSE: FDX )
|
****
|
39.9%
|
|
MEMC Electronic Materials (NYSE: WFR )
|
****
|
36.6%
|
|
Evergreen Solar (Nasdaq: ESLR )
|
***
|
113.6%
|
|
Home Depot (NYSE: HD )
|
**
|
38.9%
|
Source: Motley Fool CAPS. Price return from March 6 through April 3.
This end up
Parcel mover FedEx recently announced that it fell short of analysts' third-quarter earnings and revenue targets, and gave weaker fiscal fourth-quarter guidance, but the stock soared nonetheless.
What investors got excited about were management's comments that it’s picking up market share and calling a likely bottom for the company. That didn't stop the company from taking more action to shrink its overhead, though. The company is cutting its staff by 1,000 and looking to save about $1 billion next fiscal year with pay cuts.
FedEx shares have underperformed those of competitor UPS (NYSE: UPS ) so far this year. A recent Barron’s article suggested that the cause is investors' fears of employee unionization at FedEx, which may result from a pending bill in Congress. Historically, the article argues, FedEx has not traded at a discount to UPS, which makes the company look cheap today.
Many CAPS members agree that the stock is priced attractively, and some predict that FedEx will gain quick traction when an economic recovery starts to kick in. Overall, 90% of the 2,045 CAPS members rating FedEx expect it to outperform the market.
Wafers in the wind
Wafer maker MEMC has had a big drop in share price over the past year as the company has struggled with end-market demand for its semiconductor products. Recent rumors that MEMC is a possible takeover target gave shares a bump.
However, some analysts don’t see much substance to the rumors due to the company's lofty valuation. But recent reports of new solar subsidies from China have held more weight with investors, and have lit a raging fire under shares of stocks such as Suntech Power (NYSE: STP ) , LDK Solar, and MEMC. The government assistance could significantly help the solar industry absorb excess capacity and fuel growth.
Just as with heavyweight FedEx, many CAPS members view MEMC as one of the strongest suppliers in its segment and believe that it can actually use its position in the weak economy to come out ahead in the long term. Certainly, MEMC’s strong balance sheet and potential to generate cash make it attractive during a volatile time in the semiconductor industry. Nearly 97% of the 1,824 CAPS members rating the company give it the thumbs-up to beat the market in the future.
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 in CAPS can make your due diligence a whole lot easier.
Add your take on these or any of the 5,300 stocks that our 130,000-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.
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