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 Electronic Arts (NASDAQ:ERTS) tried to stealTake-Two Interactive (NASDAQ:TTWO) for $26 per share, stock in the latter jumped almost 55% in a single day.

But beyond one-time blips like this are stocks with compelling reasons for 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. Let's use the collective wisdom of more than 84,000 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 30% 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 sample of stocks our screen returned.

Return data is calculated as the difference between the closing price on Jan. 25 and the closing price on Feb. 26, as per MSN Money's screen. Star ranking from CAPS. Data as of Feb. 26.

Let's burrow down through this list of stocks that have thumped the market over the past month, and find out why they've performed so well.

Faith in China
In years past, it's been hard for investors to go wrong in China. But recently, there have been plenty of painful moments as overhyped and overpriced companies experienced reality checks, even in the face of bright growth prospects. The wireless sector has seen its share of ups and downs, and shares of China Techfaith -- a wireless hardware and software design firm -- have fallen over the past few years as profits began to give way to losses each quarter.

The company acknowledged that it had gotten ahead of itself, and to get back on a profitable track -- and hopefully put some bounce in the stock -- Techfaith dismissed 400 employees last May. The staff cuts were designed to save the company at least $2 million per quarter, without diminishing its capabilities to serve customers via the remaining workforce, 90% of whom are engineers.

The turnaround plan has indeed helped the company cut expenses significantly. Operating expenses dropped 30% sequentially from Techfaith's second to third quarter last year, even as revenue rose 20%. But the real key to the company's recent momentum was a 57% jump in revenue in its most recent quarter, thanks largely to a big increase in smartphone sales.

Management also remained bullish about future quarters, projecting robust growth, as well as new initiatives such as developing a device based on Google's Android operating system. However, not all CAPS investors are sold on Techfaith's turnaround value; 25 of the 182 investors rating the company still believe that it will underperform the S&P going forward. Maybe it's just too early for everyone to have faith about the company's prospects.

JDS who?
Retro investors have been cheering lately as a blast from the past -- optical networking supplier JDS Uniphase – has made a stylish resurgence. JDSU blew past analyst estimates with a 67% increase in non-GAAP net income in its most recent quarter. The improvement sent shares soaring, but JDSU's fundamentals aren't as shiny as the headlines portray -- significant costs from acquisitions and stock options actually lowered GAAP net income, compared to last year.

In general, CAPS investors remain cautious on JDS Uniphase, with 111 of the 532 investors who've rated the company casting a bearish vote. It appears that the memory of the go-go '90s is still better than the revival seen today, but we'll have to see whether performance in future quarters can change that.

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 do make an individual's due diligence a whole lot easier.

Add your take on these or any of the 5,400 stocks that our 84,000-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.