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 largely unknown among investors.

Often, news of a buyout offer sends a stock rocketing, as when STMicroelectronics offered $336 million for Genesis Microchip. The latter's shares jumped by 57% in a single day on the news. But beyond these somewhat unpredictable surges, there are stocks with fundamentally compelling stories 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 for not only finding and screening stocks, but also digging into their backgrounds.

The story behind the story
Let's jump right in, using the collective wisdom of more than 78,000 CAPS investors to look past the splashy news and find companies showing strong recent momentum.

We'll screen for stocks showing at least 20% 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 of greater than 3. Setting these limits will help us steer clear of the wild, pump-and-dump land of penny stocks.

Here's a broad sampling of stocks our screen returned today.

Company	CAPS Rating (out of 5)	1-Month Price Change
SeaChange International (Nasdaq: SEAC)	****	38%
CONSOL Energy (NYSE: CNX)	****	32%
Savient Pharmaceuticals (Nasdaq: SVNT)	***	58%
FuelCell Energy (Nasdaq: FCEL)	**	21%
Rigel Pharmaceuticals (Nasdaq: RIGL)	*	155%

Return data calculated as the difference between the closing price on Nov. 16 and the closing price on Dec. 18, as per MSN Money's screen. Star ranking from CAPS. All data as of Dec. 18.

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 its investors' opinions and comments about a company, as well as an overall ranking from its investing community. This is no crowd of lemmings; the best-performing investors' opinions carry more weight when shaping a company's ranking than those of poorer-performing peers.

Overnight wonder
This week's top gainer is another long-shot biotech stock, Rigel Pharmaceuticals. Its shares lost more than 30% this year before tripling overnight on positive results from the phase 2 study for its rheumatoid arthritis drug, R788. While the drug is still in the early stages of testing, with much more expensive phase 3 trials ahead, investors are particularly excited about the prospects of an effective arthritis drug taken orally.

But the huge run-up invited a rash of pessimism from the CAPS community; many investors can't justify the euphoria, anticipating a big fall. Nearly 75% of all the investors rating the company in CAPS believe it will underperform the S&P going forward.

Seeing change in SeaChange
CAPS investors are far more positive about recent momentum from system developer SeaChange. The company's stock fell all year long, then surprised investors with black ink on the bottom line in its most recent quarter. A 16% increase in quarterly revenue, coupled with cost-saving initiatives within the company, brought in $3.3 million in net income. Company CEO Bill Styslinger also expects a profitable fourth quarter, helped by increased demand for products in North America.

With momentum in the market for video-on-demand (VOD) products and services, SeaChange is finally converting demand from customers such as Comcast (Nasdaq: CMCSA) and Time Warner Cable into a profitable business. Many CAPS players are optimistic about the future as well, particularly with broadband video rollouts such as Verizon's (NYSE: VZ) FiOS platform gaining steam. Indeed, 132 out of 140 investors rating the company believe it will beat the S&P in the future.

What's your story?
Ultimately, the only story that counts is your own. Whether or not you buy the story of a soaring or souring stock, your own research is more important than collective opinions. But these collective opinions make an individual's due diligence much easier.

So step right up and chime in with your own take on these or any of the nearly 5,300 stocks that investors have covered in Motley Fool CAPS. It's totally free to be a part of the service, and the payback is more than worth it.