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 largely unknown among investors.

Often, news of a buyout offer sends a stock rocketing. That's what happened when Gramercy Capital offered $3.4 billion for American Financial Realty Trust. American Financial's stock jumped more than 24% in a single day on the news. But beyond these somewhat unpredictable surges, there are stocks with fundamentally compelling stories 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 for not only finding and screening stocks, but also getting their background information.

The story behind the story
Let's dig right in, using the collective wisdom of more than 74,000 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 of greater than 3. Setting these limits will help us steer clear of the wild, pump-and-dump land of penny stocks.

Here's a broad sampling of stocks our screen returned today.

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 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 participants. Thus, a company's ranking is influenced more strongly by investors who have proved themselves better than the average dart-throwing monkey.

United we stand
Often, it takes a premium buyout offer to move a stock 38% in a single day. But the greater-than-50% rise drugmaker United Therapeutics enjoyed this month owed not to M&A news, but to a blockbuster earnings report that blew past analysts' expectations. Thanks to booming sales of its pulmonary arterial hypertension (PAH) drug Remodulin, the company reported earnings of $0.66 per share. That almost doubled the average analyst guess of $0.34 per share.

But more cash coming in from a drug currently on the market is only part of the story. United Therapeutics also announced that a phase 3 trial of inhaled PAH drug Viveta yielded positive results. Once regulatory filings are made and the drug gains FDA approval, the company hopes to see Viveta offered alongside current treatments like Pfizer's (NYSE:PFE) Revatio or Actelion's Tracleer. The results also bode well for oral forms of the drug, anticipated to supplement competing drugs such as Gilead Sciences' (NASDAQ:GILD) Letairis. With a four-star rating, a solid contingent of CAPS players are bullish on United Therapeutics. Twenty-nine of 30 All-Stars see the stock outpacing the S&P going forward.

Fully charged
Battery technology firm Valence Technology has also seen its stock surge in the past month, boosted by news of a 3-million-share placement that ultimately raised $4.3 million in additional funds. But with Valence's long history of burning through cash, CAPS investors maintain a largely bearish stance on the company. The attractive story of safe battery technology, pitched to a world dying for more efficient hybrid cars and longer-lasting portable devices, has won out recently in its stock price, but I have to side with more than 80% of the CAPS All-Stars who gave an opinion, in believing that the company will underperform the market in the long run.

What's your story?
Ultimately, the only story that counts is your own. Whether you buy the story of a soaring or a 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 5,200 stocks that investors have covered in Motley Fool CAPS. It's totally free to be a part of the service, and the payback is more than worth it.