More Than Momentum: Stocks Rising for a Reason

Even on the market's worst days, buyout news and other short-term forces can send individual stocks up by 10%, 25%, even 50%.

For example, the stock of electrical equipment maker AZZ (NYSE:AZZ) rose 22 % in a single day when the company announced a better than expected quarterly profit.

But beyond less-predictable events like that one are stocks with fundamentally compelling reasons for recent momentum. The trick is to find those stocks. 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 110,000 CAPS investors to filter out the noise and find companies offering strong momentum.

We'll use CAPS' handy stock screening tool to quickly zero in on companies with a stock price increase of at least 20% in the past four weeks, 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 CAPS screen returned:

Return data is calculated as the difference between the closing price on June 2 and the closing price on June 30, per Yahoo! Finance. Star rankings from CAPS.

With our list of screened stocks pulled up in CAPS, it then only takes a single click on individual companies to get some context behind the recent momentum.

Krispy Kreme
Once the sweetheart of investors, Krispy Kreme brought the market off its doughnut high with several years of losses because of high operating costs, restructuring, and legal settlements. But management recently made some moves to get back to consistent profitability. Krispy Kreme posted diluted earnings per share of $0.06 for the first quarter and even had positive cash flow. But even paying down some long-term debt and expansion around the world hasn't enticed many CAPS investors back to the counter: More than 53% of investors rating the company see it as an underperformer.

BPZ Resources
Houston-based BPZ Resources isn't looking under its own feet for black gold -- the oil and gas explorer has rights and licenses for exploration in about 2.4 million acres in Peru. With operations spinning up fast -- production that stood at 500 barrels of oil a day in the first quarter is expected to be at 11,000 by the end of 2009 -- investors are just trying to catch up to this big winner. With oil prices soaring and earnings targets being raised, 95% of the 925 investors rating BPZ expect it to outperform the market.

EXCO Resources and St. Mary's Land & Exploration
Two other exploration and production companies -- EXCO Resources and St. Mary's Land & Exploration -- are being buoyed by record oil prices as well. To meet demand for oil and natural gas, St. Mary's has increased drilling activity and raised its production forecast for 2008. Production at EXCO has more than doubled in the past year, causing even mild-mannered Fool Toby Shute to shout a few expletives. With some analysts seeing no end in sight for oil prices, stock prices of both companies have been soaring. CAPS investors are largely on board this megatrend, with more than 97% of the investors rating each company believing that they will continue to outperform the market.

China Medical Technologies
With the population in China growing rapidly, it makes sense that adequate health care is in big demand. Diagnostic company China Medical is showing that it's a very profitable business as well, reporting a 74% year-over-year increase in revenue for its latest quarter. With this success, as well as other companies such as Hologic (NASDAQ:HOLX) and Affymetrix making moves into diagnostic testing, CAPS investors see even more potential for big growth, with 97% of the 1,052 investors rating China Medical saying they're bullish.

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

Add your take on these or any of the 5,500 stocks that our 110,000-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.