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 get you only so far. I prefer to find high-quality stocks that also have some positive inertia on their side. It's like moving 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 a high rating among CAPS players.
|
Company |
12-Month Price Change |
Percent Below 52-Week High |
CAPS Rating (5 Max) |
|---|---|---|---|
|
Walter Industries |
191% |
2.9 |
**** |
|
Bucyrus International |
110% |
0.5 |
***** |
|
BHP Billiton |
65% |
2.8 |
***** |
|
Arcelor Mittal |
61% |
1.5 |
***** |
|
Smith International |
50% |
1.5 |
**** |
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.
The not-dot-com
Could anything be further from the tech-heavy boom in 2000 than the current thriving market for natural resources? Eight years, ago everyone was obsessed with very 21st-century concepts like increasing network bandwidth, fitting more computing instructions on a smaller silicon chip, and increasing the options people had to shop from their desk chairs. Today, it's back to the basics, with a focus on oil, metals, and grains.
Every one of the companies above is involved with the production of natural resources, whether they are pulling the stuff out of the ground or manufacturing the means to do the digging. Coal has been particularly hot lately with global demand is screaming, while supply has been affected by problems in major production areas such as Australia. Though Walter Industries' first-quarter results were hurt by its lagging homebuilding and financing segment, the company has picked up some major momentum since announcing that it has settled some contracts for 2008-2009 coal production at $315 per metric ton. To put that in perspective, Walter averaged just less than $95 per metric ton during its fourth quarter.
An even more interesting play on the coal boom, though, is Bucyrus, a smaller competitor to Joy Global
So far, 559 CAPS players have placed bets on Bucyrus, with 540 of them expecting that the stock will outpace the S&P index. One of the Bucyrus bulls, thunderbelly1941, thinks the equipment manufacturers are a better bet than the actual coal miners:
The best plan is not to invest in actual mining, but, rather the companies that supply them with equipment with which to conduct their mining operations. [Bucyrus] designs, manufactures mining equipment for the extraction of coal ... and other minerals in mining centers throughout the world. In addition to the manufacture of original equipment, the Company also provides the aftermarket replacement parts and service for equipment.
So do you think Bucyrus deserves a place on your All-Star team? You can share your thoughts on it or check out more of what your fellow Fools had to say about it or any of the other stocks above by stopping by CAPS. And while you're there you can also take a peek at few more of the 5,600-plus other stocks that are rated on CAPS.
I think I heard a boo-yah somewhere out there -- thanks, Stuart Scott!
More CAPS Foolishness:
Walter Industries is a former Motley Fool Hidden Gems recommendation. Try any of our Foolish newsletters today, free for 30 days.
When it comes to basketball, Fool contributor Matt Koppenheffer might be the guy Ron Shelton was thinking of when he thought of the title White Men Can't Jump. He does not own shares of any of the companies mentioned. The Fool's disclosure policy has a 55-inch vertical jump and can dunk from half-court. Or so I hear.
