More Than Momentum: Stocks Rising for a Reason

Even on the market's worst days, buyout news or other short-term forces can send individual stocks up by 10%, 25%, even 50%. For example, when Oracle (Nasdaq: ORCL) followed its failed offer three months ago with a higher, $8.5 billion cash offer for software developer BEA Systems (Nasdaq: BEAS), the latter's stock jumped more than 18% in a single day.

But beyond one-time blips like this are stocks with compelling reasons for their recent momentum -- provided you can find them. That's where Motley Fool CAPS comes in.

The story behind the story
CAPS is no crowd of lemmings; its best-performing investors' opinions do more to shape each company's rating than the picks of their poorer-performing peers. So, let's use the collective wisdom of more than 82,000 CAPS investors to filter out the noise and find companies showing strong momentum. We'll screen for companies with a stock-price increase of at least 25% in the past month, a market cap of greater than $100 million, and a beta of less than 3. That'll keep us clear of the wild, pump-and-dump land of penny stocks.

Here's a sampling of stocks our screen returned.

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.

Super frog
Tiny biopharmaceutical company Alfacell has literally bet the farm on a frog. The company's only product, Onconase, is based on a natural protein isolated from the leopard frog. The protein, which has been shown to target cancer cells but spare healthy cells, is in phase 3 trials for the treatment of inoperable malignant mesothelioma.

And the bet has been paying off lately -- Alfacell's stock has soared higher thanks to a series of deals to commercialize the treatment with partners. While the company awkwardly waits for the trial to conclude, it's busy counting money from a commercialization deal with Strativa Pharmaceuticals, owned by Par Pharmaceuticals. Inked last week, the deal infuses $5 million into Alfacell up front, with potentially another $30 million due if Onconase receives FDA approval for the current cancer treatment in testing.

A marketing deal that will spread the product to South Korea, Taiwan, and Hong Kong soon followed, giving Alfacell even more potential for significant earn-out payments and royalties that are contingent on reaching certain undisclosed milestones. Taken together, the progress toward commercialization of the drug has given some investors a higher level of confidence that Onconase will successfully conclude trials and generate significant revenue for the company. While a few CAPS investors still see too much risk in Alfacell, 102 of the 111 investors rating the company believe it will outpace the S&P going forward.

Bouncy cat
It's common to see stock in biotech and pharmaceutical firms shooting higher on positive news, and Motley Fool Rule Breakers recommendation InterMune had its turn a couple of weeks ago, when the company reported good progress in a trial for its hepatitis C virus inhibitor. It's also very common to see -- in the absence of good news -- these stocks plunging to basement levels as cash dwindles.

Investors had been pushing InterMune down all year, as sales for its commercialized drug Actimmune drooped and delays in development also surfaced. On top of that bad news, the company diluted its shares by another 12% with a share offering that raised another $74 million for ongoing operations. But the recent progress in the hepatitis C trial reversed the pessimism, and shares bounced off their lows. While the company remains on track with development of multiple drugs, CAPS investors are divided on InterMune's prospects, with 32% of the All-Star players who have rated the company registering bearish votes.

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

Step right up and add your own take on these or any of the more than 5,300 stocks that 82,000-plus investors 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.