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 Return
|
Percent Below 52-Week High
|
CAPS Rating
|
|
Companhia Siderurgica Nacional (NYSE: SID)
|
202%
|
3.7%
|
****
|
|
Cleveland-Cliffs (NYSE: CLF)
|
122%
|
1.3%
|
*****
|
|
Walter Industries (NYSE: WLT)
|
84%
|
1.3%
|
****
|
|
Helmerich & Payne (NYSE: HP)
|
56%
|
0.3%
|
*****
|
|
Ultra Petroleum (NYSE: UPL)
|
47%
|
0.2%
|
*****
|
Sources: Yahoo! Finance, CapitalIQ, and CAPS as of Feb. 11.
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.
Follow the coal
Just last month I featured Motley Fool Hidden Gems pick Walter Industries in this column. Only, at that point the stock was up just 47% over the past year, whereas it's now rapidly approaching a one-year double.
So why the big jump?
Well, to figure that out, first you have to navigate around Walter's business segment, which deals in homebuilding and mortgage financing. That's right, it's in that business (queue ominous music).
It's actually not as bad as it sounds. Walter, through its Jim Walter Homes segment, builds homes the old fashioned way -- you buy the lot, and then they come and build your house. So even though the company's building activities have been hurt by the downturn, at least it's not sitting on a heap of unsold lots. It does finance the homes, though, and has a $1.7 billion mortgage portfolio. So the company's not completely in the clear, but its situation isn't nearly as dire as many other homebuilders'.
Once you get past its housing segment, you'll notice that Walter has a natural resources division that produces coal and natural gas. Better still, it primarily produces metallurgical coal, a high-quality form of coal that's used in the process of turning iron ore into steel. Thanks to the heavy dose of global growth, metallurgical coal has been in high demand, and prices have been leaping. Thus, investors have ended up on Walter's doorstep.
CAPS investors have been bullish on the company by a ratio of nearly 26 to one. One of these Walter bulls, gordonsgold, likes the coal angle and believes the building segment won't be around for long. He said, "Steel and steel alloys must use this coal for processing. Also has a residential / commercial construction company -- look for spin off soon."
So do you think Walter deserves a place on your All-Star team? You can share your thoughts or check out what your fellow Fools had to say about it -- or any of the other stocks above -- when you stop by CAPS. And while you're there, you can also take a peek at few more of the 5,000 other stocks that are rated on CAPS.
I think I heard a boo-yah somewhere out there -- thanks Stuart Scott!
More CAPS Foolishness:
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