When the clock's ticking down and the game's on the line, which of your teammates do you trust to sink a winning shot? Sure, you could dish the rock to your resident superstar -- but what if he's playing ice-cold at the moment? So instead, you pass to the guy with the hot hand, the one who'll be deemed en fuego tomorrow on ESPN.
Momentum investors are looking for stocks in a similar state of sizzle. But momentum by itself will only get you so far. I prefer to find high-quality stocks that also have some positive inertia on their side. It's like kicking the ball out to your team's superstars when they do have a hot hand.
To find these league-leading winners, I cross-referenced a simple momentum screen with data from The Motley Fool's CAPS investing community. Each of the companies below is up 30% or more over the past year, now trades within 5% of its 52-week high, and has been rated highly by CAPS players.
|
Stock
|
12-Month Price Change
|
Percent Below 52-Week High
|
CAPS Rating (out of 5)
|
|
Medco Health Solutions (:MHS)
|
84%
|
4.9%
|
*****
|
|
NIC Inc. (:EGOV)
|
68%
|
4.6%
|
*****
|
|
Humana (NYSE:HUM)
|
56%
|
4.3%
|
****
|
|
Teva Pharmaceutical (NASDAQ:TEVA)
|
39%
|
3.8%
|
*****
|
|
Pharmaceutical Product Development (NASDAQ:PPDI)
|
37%
|
4.0%
|
*****
|
Sources: Yahoo! Finance, Capital IQ, and CAPS as of Jan. 18.
At first glance, this sure looks like a high-quality group. But, as always, I highly advise taking a close look before you throw a bounce pass in the direction of any of these stocks.
Hiding out in health care
With investors around the globe running for the hills lately, finding stocks that are truly on fire is more difficult than ever. But, as Jim Cramer would say, there's always a bull market somewhere.
Right now, as everything else slumps, the health-care sector is continuing to see money head its way. Investors are busy preparing for a recession (some believe we are already knee-deep in one), and that means selling off anything that will take a hit as the economy heads south -- think Nordstrom (NYSE: JWN ) or Apple (Nasdaq: AAPL ) . Demand for health care, on the flip side, is far less elastic, and consumers are not as likely to cut back on health-care spending.
What's great about Teva Pharmaceutical is that investors can simultaneously take advantage of the steady demand for health-care products and the nationwide tightening of purse strings. Teva is a $35 billion Israeli manufacturer of generic pharmaceuticals, including generic versions of blockbusters like Zocor, Zoloft, and Wellbutrin. So while individuals may not be able to cut down on the number of pills they pop, it's more likely than ever that they will look for cheaper generic alternatives to brand-name drugs.
One of CAPS' top investors, Gtrinvestor, is bullish on Teva and offered this long-term growth story:
[It's] looking more and more likely that we will have a democrat in the White House ... Either way, even if a republican ends up in the White House, medical costs are going to be a bigger and bigger issue (just like oil). If you doubt how big an issue, just talk to a few companies over in Detroit about how they view medical costs.
In addition, as the baby boomers continue to age, do you think that the courts are going to be more or less protective of patent suits by the big drug manufacturers?
So does Teva deserve a place on your All-Star team? You can share your thoughts on it -- or check out more of what your fellow Fools have to say about it, or any of the other stocks above -- by stopping by CAPS. And while you're there, you can take a peek at a few more of the 5,000 other stocks that are rated on CAPS.
I think I heard a "booyah" somewhere out there - thanks, Stuart Scott!
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