5 Stocks Breaking Out

Volatile markets seem to be the norm these days, as stocks gyrate through ups and downs on a daily basis. But sometimes buyout news and other short-term forces can send individual stocks up by 10%, 25%, even 50% -- even on the market's worst days.   

Recently, a swing to a quarterly profit fueled by a tax benefit sparked a multiday rally of shares of highly volatile insurer Ambac Financial, which jumped 71% one day and more than 100% the next.                                  

But beyond less-predictable events like that one are stocks with fundamentally compelling reasons behind a big move. 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. Here's an example of how we can use the collective wisdom of more than 160,000 CAPS members to filter out the noise and find companies with strong potential.

We'll use CAPS' handy stock screening tool to quickly zero in on companies with a stock price increase of at least 20% in the past four weeks, a market cap of greater than $100 million, and a beta of less than 3. Then we can use the insight of the CAPS investment community to add some context.

Source: Motley Fool CAPS. Price return from March 19 through April 16.

Shares of Solarfun Power bounced back up recently along with peers in the sector with more evidence of a pickup in demand for solar equipment, and biotech Rexahn Pharmaceuticals has been stoking optimism with more details on studies related to its treatments for Parkinson's disease and major depressive disorder (MDD). But let's take a deeper dive into three stocks the 160,000-strong CAPS community has consistently given high marks to -- KMG Chemicals, NCI Building, and Taseko Mines.

KMG Chemicals
On top of reporting a huge increase in earnings and growing revenue in its fiscal second quarter, KMG Chemicals recently acquired General Chemical's electronic chemicals business, the latest in its string of acquisitions. The acquisition is expected to expand the presence of its own electronic chemicals business and add to earnings beginning in fiscal 2011. Macro conditions are improving, too; one indirect competitor of KMG Chemicals, Honeywell (NYSE: HON), recently said it's experiencing improvement in all of its businesses -- including electronic materials. With the potential to add even more to the top and bottom lines with additional acquisitions, many contend this could only be the beginning for this small-cap company. In CAPS, 93% of the 291 members rating KMG Chemicals expect it to beat the broader market.

NCI Building Systems
Ever since NCI Building Systems reported its first-quarter financials on the tail of a reverse split, investors have been steadily buying into the stock, despite word that management sees no meaningful increase in nonresidential construction activity this year. Many investors in CAPS believe it's a solid company in the wrong place at the wrong time, so that keeps it ranked at four stars.

Taseko Mines
Taseko Mines is one of several miners, like Silver Standard Resources, that's aiming to tap the precious metal potential of British Columbia, and several things have been going Taseko's way lately. Strong production from its Gibraltar mine and an increase in metals prices helped generate strong cash flow for the company in 2009. Taseko recently reported that Gibraltar continued to put up strong production numbers in the first quarter. The 23.2 million pounds of copper and 194,000 pounds of molybdenum produced represents a strong increase in production over the fourth quarter, and, after the company completes construction projects to ramp up production, Taseko looks to boost its numbers even further. In addition to Gibraltar's performance, CAPS members are also excited about the prospects for Taseko's Prosperity gold and copper project, for which it received environmental permits from British Columbia earlier this year.

It has taken several steps to help secure funding for construction, and investors say the project could bring a lot of value. All the prospecting potential is enough for 97% of the 1,657 CAPS members rating Taseko Mines to say it's a market-beating investment.

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 other 5,400 stocks that our 160,000-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.