More Than Momentum: Stocks Rising for a Reason

Even on the market's worst days, headlines and ticker feeds tout soaring stocks. Some juicy rumor or biotech wonder drug seems to be reason enough for a stock to climb 10%, 25%, even 50% -- sometimes in a single day. Sometimes, the companies are familiar, but many are names and stories entirely unknown to investors.

Often, news of a buyout offer sends a stock rocketing, like Darden Restaurants' $1.2 billion bid for Rare Hospitality, which caused the latter's stock to surge 36% in a single day. But beyond these somewhat unpredictable surges, there are stocks out there with a fundamentally compelling story behind their recent momentum. The difficulty comes in sifting through the daily trading and news-driven gyrations to find them.

Luckily, there's help right at your fingertips. Motley Fool CAPS is a great tool not only for finding and screening stocks, but also for getting a quick read on the fundamental stories behind them.

The story behind the story
Let's dig right in, using the collective wisdom of more than 65,000 CAPS investors, to look past the splashy news and find companies showing strong recent momentum.

We'll screen for stocks showing at least 30% price appreciation in the past month. Then we'll weed out stocks with less than a $100 million market capitalization and those with a beta greater than 3. Setting these limts will help keep us out of the wild, pump-and-dump land of penny stocks.

Here, then, is a broad sampling of stocks that our screen returned today.

Now let's sift further through this list of stocks that have thumped the market over the past month and find out why they've performed so well.

The method behind the madness
CAPS contains a searchable record of investors' opinions and comments about a company, as well as an overall ranking from the investing community. Lest you think this sound like following a crowd of lemmings, note that the opinions of the best-performing investors are weighed more heavily than of those who haven't done so well. Thus, a company's ranking is influenced more strongly by investors who have already proved themselves better than the average dart-throwing monkey.

All the medicine in China
High growth rates and soaring stock charts don't usually characterize medical diagnostic companies, but China Medical Technologies is breaking that mold. With its recent IPO on U.S. shores two years ago, the developer of ultrasonic tumor-fighting therapy methods started turning a few heads with its impressive 46% net revenue growth in the quarter that ended in June. Then the China Medical team followed up with a 67% jump in net revenue in its most recent quarter, lifted by an 85% increase in sales of its immunoassay line of analyzers and reagents.

While a forward price-to-earnings ratio of 21.2 may lead to questions about valuation on a medical diagnostic stock such as this, the high growth prospects ahead still have more than 97% of CAPS investors bullish on the company.

Sirius offers only, please
Never one to be out of the news for long, satellite-radio provider XM is showing some momentum, largely attributable to optimism that its merger with Sirius Satellite Radio (NASDAQ:SIRI) has an improved chance to clear regulatory hurdles. First, last month a federal court moved in to block the Federal Trade Commission's effort to scuttle the merger between Whole Foods Market and Wild Oats on antitrust concerns. Investors and analysts believed that this check on the FTC's power to block mergers boded well for XM and Sirius. Then, former FCC commissioner Mark Fowler wrote a letter in the New York Sunsupporting the marriage -- a move that further fueled gains in both stocks.

With or without the merger, lingering questions about the profitability of satellite radio as a business are still big on CAPS investors' minds, as evidenced by XM's low one-star rating. But renewed hope that the deal might actually go through is helping to drive the stock in the short term.

What's your story?
Ultimately, the only story that counts is your own. Whether you buy the story of a soaring or souring stock, your own research is more important than collective opinions. But thankfully, these collective opinions make an individual's job of due diligence much easier.

So step right up and chime in with your own take on these or any of the more than 5,000 stocks that investors have covered in Motley Fool CAPS. It's totally free to be a part of this story, and the payback is more than worth it.