3 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 soaring by 10%, 25%, even 50% -- even on the market's worst days.        

For example, shares of Citigroup subsidiary Student Loan Corp. shot up 41% recently when it was announced that the unit would be sold to Discover Financial Services.

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 170,000 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 three. Then we can use the insight of the CAPS investment community to add some context to these market movers.

Company

CAPS Rating
(out of 5)

4-Week
Price Change

Brocade Communications Systems (Nasdaq: BRCD  )

****

29.1%

Bucyrus International (Nasdaq: BUCY  )

****

24.2%

Best Buy (NYSE: BBY  )

***

24.3%

Source: Motley Fool CAPS. Price return from Aug. 27 through Sept. 24.

Brocade
The weak margin outlook Brocade recently issued certainly hasn't helped its stock, but buyout speculation that continues to swirl around the company has more than made up for the downside pressure. With a steep drop in margins coming from lower prices to better compete with Cisco (Nasdaq: CSCO  ) , more investors have been bucking the tide with bets on a possible takeover. The bidding war for 3Par sparked some renewed interest, and shares shot up 11% when IBM's name was brought up in reported rumors. Some CAPS members still see some turnaround potential aside from a takeover, but many are willing to make potential profits either way. In CAPS, 94% of the 733 members rating Brocade expect it to outperform the broader market.  

Bucyrus
Investors like some of the recent signs that have been suggesting good times ahead for Bucyrus' business -- fellow mining equipment maker Joy Global (Nasdaq: JOYG  ) recently raised its outlook as it forecasts a rise in mining industry capital spending, while Caterpillar also reported a surge in August sales in multiple markets. Bucyrus saw strong growth in its own backlog in its most recent quarter, and armed with the added assets that it picked up from Terex, CAPS members think Bucyrus is well-positioned to capture any coming growth in demand. Overall, 97% of the 1,142 CAPS members rating Bucyrus expect believe it will outpace the S&P.

Best Buy
While fiscal second-quarter comparable sales were essentially flat, Best Buy has been able to increase margins and boost its bottom line thanks to strong sales of more profitable wireless gear. Similar to RadioShack's (NYSE: RSH  ) push to expand its mobile presence, Best Buy continues to expand its profit-boosting Best Buy Mobile format ahead of the holiday season. It's also aiming to add to its inventory of e-readers with a somewhat surprising deal to carry rival Amazon.com's (Nasdaq: AMZN  ) Kindle. Best Buy's CAPS rating sits at an average three stars, but more CAPS members have been chiming in about the stock's attractive valuation as 86% of the 3,241 members rating Best Buy now see it as 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 5,400 stocks that our 170,000-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.

Always looking ahead, the Motley Fool Rule Breakers service is picking the next generations' big winners today. To see what rule-breaking stocks David Gardner is recommending now, take a free 30-day trial.

Fool contributor Dave Mock has his own story, but there's no "happily ever after" at the end of it. He owns no shares of companies mentioned here. Best Buy and Discover Financial Services are Inside Value picks. Amazon.com and Best Buy are Stock Advisor recommendations. The Fool has established a bear put spread position on Caterpillar. The Fool has written calls (bull call spread) on Cisco Systems. Motley Fool Options has recommended buying calls on Best Buy. The Fool owns shares of Best Buy and International Business Machines.

True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community. The Fool's disclosure policy has the momentum of a freight train, but can stop on a dime.


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  • Report this Comment On September 28, 2010, at 10:52 PM, maximus9 wrote:

    "Joy Global recently raised its outlook forecasting a rise in capital spending".

    "Analyst upgrades JOYG to buy"

    Here is another news headlines:

    "The top management of JOYG sells over $8 million shares"

    Looks like everyone is joyously bullish on JOYG except the insiders !! Should retail investors be jumping in when price is hitting 2 year highs ?

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