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 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 (5 max)
|
|
Woodward Governor Co. (Nasdaq: WGOV)
|
58.3%
|
4.7%
|
*****
|
|
Union Pacific (NYSE: UNP)
|
54.7%
|
1.2%
|
****
|
|
Tetra Tech
|
48.9%
|
4.7%
|
****
|
|
Church & Dwight (NYSE: CHD)
|
39.4%
|
1.3%
|
****
|
|
Covidien
|
37.0%
|
2.8%
|
****
|
Sources: Yahoo! Finance, Capital IQ, a division of Standard & Poor's, and CAPS, as of Sept. 1, 2008.
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.
A rockin' Governor
Woodward Governor is far from a wayward son, but this $3 billion company isn't one that gets tossed around too often by investors. It should be.
Over the past five years, the stock is up more than five-fold as Woodward has found itself falling right into a sweet spot in the market. The company makes the guts that help run General Electric (NYSE: GE) and United Technologies (NYSE: UTX) aerospace turbines, Caterpillar (NYSE: CAT) engines, and electrical generation equipment such as wind turbines.
Just in case you missed that, I said wind turbines. And when it comes to Woodward Governor, clean energy isn't the only thing that wind turbines are producing. In Woodward's third fiscal quarter, the division that works with wind turbines boosted its revenue and earnings 57% and 107%, respectively, on what the company termed an "exceptional pace" for wind products specifically. Overall, the company saw earnings jump 38% for the quarter, $0.04 ahead of where Wall Street set the bar.
All I can say is carry on Woodward Governor.
Surprise!
Church & Dwight may not be a name that you're familiar with, but I bet Arm & Hammer is. Similar to consumer giant Procter & Gamble (NYSE: PG), C&D owns a handful of great consumer brands such as Arm & Hammer, Trojan condoms, Mentadent toothpaste, First Response pregnancy tests, and OxiClean. And while the company's ownership of the brands may be a surprise, the performance over the past year shouldn't. Investors tend to flock to companies with products like C&D's when the economy is at its rockiest.
On CAPS -- where C&D is a four-star pick -- All-Star member mindmuse thinks that there may be growth opportunities available to the company. Though mindmuse called C&D a "true Tortoise stock" earlier this year, this member also noted:
Steady, solid grower as far back as you can look with brand names far more recognizable than their own name. They keep growing markets and margins.
And hey, while China government issues free condoms, there is now a growth market in premium condoms there. Jackie Chan is pitching TV ads for condom use there. [Church & Dwight's] Trojan brand is world's top brand with great margins and is now sold in China. You think Chinese with increasing discretionary income might want a little better bang for their buck over a government issue equipment?
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 or check out what more of your fellow Fools had to say by stopping by CAPS. And while you're there, you can take a peek at a few more of the 5,500 other stocks that are rated on CAPS.
I think I heard a booyah somewhere out there -- thanks Stuart Scott!
More CAPS Foolishness:
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