More Than Momentum: Stocks Rising for a Reason

Even on the market's worst days, headlines and ticker feeds tout soaring stocks. Some juicy rumor or biotech wonder drug seems to be reason enough for a stock to climb 10%, 25%, even 50% -- sometimes in a single day. Sometimes, the companies are familiar, but many are names and stories entirely unknown to investors.

Often, news of a buyout offer sends a stock rocketing, such as PerkinElmer's $300 million bid for blood storage company ViaCell, which caused  ViaCell's stock to jump more than 50% in a single day. But beyond these somewhat unpredictable surges, there are stocks out there with a fundamentally compelling story behind their recent momentum. The difficulty comes in sifting through the daily trading and news-driven gyrations to find them.

Luckily, there's help right at your fingertips. Motley Fool CAPS is a great tool not only for finding and screening stocks, but also for getting the background.

The story behind the story
Let's dig right in, using the collective wisdom of more than 72,000 CAPS investors, to look past the splashy news and find companies showing strong recent momentum.

We'll screen for stocks showing at least 30% price appreciation in the past month. Then we'll weed out stocks with less than a $100 million market capitalization and those with a beta greater than 3. Setting these limits will help keep us out of the wild, pump-and-dump land of penny stocks.

Here, then, is a broad sampling of stocks that our screen returned today.

Data from MSN Money. Star ranking from CAPS. All data as of Oct. 30.

Now let's sift further through this list of stocks that have thumped the market over the past month and find out why they've performed so well.

The method behind the madness
CAPS contains a searchable record of its investors' opinions and comments about a company, as well as an overall ranking from its investing community. Lest you think that this sounds like following a crowd of lemmings, note that the opinions of the best-performing investors are weighted more heavily than those from poorer-performing investors. Thus, a company's ranking is influenced more strongly by investors who have proven to be better than the average dart-throwing monkey.

Processing gains
Truly a case of more than just momentum, microprocessor technology developer and licensor Transmeta blew the doors out this last month by more than doubling in share price. The reason was a huge litigation settlement with Intel (NASDAQ:INTC) that included $250 million in cash flowing in Transmeta's direction. The news reversed a long downward spiral in shares that was fed by investors' worries that the company would wither away before significant deals materialized.

While a cash infusion from Intel rival AMD (NYSE:AMD) back in July gave the stock a temporary lift, a long-term growth model for Transmeta still never crystallized for investors. The Intel settlement has some now believing that the licensing model is validated and more licensees will come to the table, but some CAPS investors think that even bidding the stock up to a market cap of $130 million is too generous: 39% of CAPS investors rating the stock believe it will underperform the S&P going forward.

Dry shipping all wet?
It's not too hard to find a dry bulk shipper these days that is showing momentum, and this week Quintana Maritime makes the list, carrying a five-star ranking in CAPS. While I agree with a few Fools that peer DryShips is one scary stock, Quintana doesn't carry the same heady valuation or questionable management history. News that the company was exploring strategic options to increase shareholder value is what boosted the stock recently. In general, CAPS investors agree that Quintana's shipping fleet is more valuable than the stock price leads on, as 418 of the 428 rating the company believe it will outpace the S&P.

What's your story?
Ultimately, the only story that counts is your own. Whether you buy the story of a soaring or souring stock, your own research is more important than collective opinions. But these collective opinions make an individual's due diligence much easier.

So step right up and chime in with your own take on these or any of the more than 5,100 stocks that investors have covered in Motley Fool CAPS. It's totally free to be a part of this, and the payback is more than worth it.