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 Change
|
Percent Below 52-Week High
|
CAPS Rating (out of 5)
|
|
FLIR Systems (Nasdaq: FLIR )
|
80.9%
|
3.7%
|
*****
|
|
Exatech (Nasdaq: EXAC )
|
72.5%
|
2.5%
|
*****
|
|
W-H Energy Services (NYSE: WHQ )
|
48.5%
|
4.7%
|
*****
|
|
AeroVironment (Nasdaq: AVAV )
|
43.6%
|
3.5%
|
****
|
|
Natus Medical (Nasdaq: BABY )
|
34.9%
|
3.8%
|
*****
|
Sources: Yahoo! Finance; Capital IQ, a division of Standard & Poor's; and CAPS as of July 7.
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.
Got government?
With the markets in full-on retreat since mid-May, stocks making new highs are even harder to find than pictures of Matthew McConaughey with his shirt on. Financials continue to decline on bad debt fears, tech is falling on economic worries, and even energy -- which was one of the few holdout sectors -- has recently pulled back a bit as prices of oil and coal have taken a hit.
Even defense, which can often be a refuge from weak markets -- especially when we're at war -- has been a mixed bag at best. Lockheed Martin (NYSE: LMT ) has held up relatively well versus the rest of the market, but others, like Northrop Grumman (NYSE: NOC ) , haven't fared as well. However, digging into the defense market might also lead you to FLIR Systems.
FLIR makes thermal imaging systems -- the type of cool gear that no Tom Clancy protagonist would be caught without. Though the company makes products for both commercial and government applications, government orders -- including a big $358 million Army contract in May -- have really been putting some pep into the stock.
The stock is a strong five-star pick on CAPS, with an impressive 190-to-1 outperform-to-underperform record among CAPS All-Stars. As CAPS player SurefireU2 recently noted, FLIR's products have applications in the civilian, police, and military markets, and "in a down economy, the military and police will still need their product."
Oh BABY!
And as long as we're talking about products that will still have buyers even in a down market, let's not overlook Natus Medical and its health-care products for newborns. Natus has been growing by leaps and bounds through a combination of internal organic growth and a heavy diet of small acquisitions.
Natus is another five-star stock on CAPS, and its fan club is nearly 1,200 investors strong. CAPS All-Star and fellow Fool TMFMmbop is one of those Natus bulls, and he pitched his support for the stock more than two years ago:
Natus Medical is building a burgeoning monopoly in its industry. That industry is medical devices for newborn testing. Like the old razor/razor blade analogy, Natus not only is penetrating more and more hospitals with their equipment, they also then supply the various parts and pieces to make them work every day. I love to find small companies that are on the verge of controlling their niche, and I think that's going to be the case here.
Fielding your team
So do you think any (or all!) of these companies deserve a place on your All-Star team? You can share your thoughts on them, or check out more of what your fellow Fools had to say, by stopping by CAPS. And while you're there, you can also take a peek at few more of the 5,500-plus other stocks that are rated on CAPS.
I think I heard a “booyah” somewhere out there – thanks, Stuart Scott!
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