More Than Momentum: Stocks Rising for a Reason

Even on the market's worst days, buyout news and other short-term forces can send individual stocks up by 10%, 25%, even 50%. For example, a new day and a Federal Reserve interest-rate cut helped breathe new life into battered shares of Lehman Brothers (NYSE: LEH) and Thornburg Mortgage (NYSE: TMA). Each stock shot up more than 30% yesterday.

But beyond one-time blips like this are stocks with compelling reasons for recent momentum. The trick is to find those stocks. That's where Motley Fool CAPS comes in.

The story behind the story
CAPS is no crowd of lemmings. Its best-performing investors' opinions do more to shape each company's rating than the picks of their poorer-performing peers do. Let's use the collective wisdom of more than 89,000 CAPS investors to filter out the noise and find companies displaying strong momentum.

We'll screen for companies with a stock-price increase of at least 25% in the past month, a market cap of greater than $100 million, and a beta of less than 3. That'll keep us clear of the wild, pump-and-dump land of penny stocks.

Here's a sample of stocks our screen returned:

Let's burrow down through this list of stocks that have thumped the market in the past month and find out why they've performed so well.

Pump it up
Hydraulic-valve maker and Motley Fool Hidden Gems recommendation Sun Hydraulics makes the momentum list for a second time in less than a year, after shares jumped again this past month on a solid fourth-quarter earnings report. With only a $500 million market cap in an industry that I'd bet few investors find all that exciting, Sun Hydraulics probably doesn't get your juices flowing -- but it should.

The company was founded almost 40 years ago, has been profitable since 1972, and, after going public in 1997, has paid a dividend in every quarter. Sun's high-performance screw-in hydraulic cartridge valves and manifolds are sold internationally to manufacturers of heavy equipment used in construction, mining, and oil-drilling activities. With infrastructure companies experiencing tremendous growth over the past several years, it's no wonder Sun Hydraulics is benefiting as well.

In its recent earnings report, the company grew annual sales at an 18% rate while earnings doubled this increase at 36% year over year. Sun noted that 80% of this growth in 2007 came from international customers. In contrast to many other companies giving a bleak 2008 outlook, the company forecasted 15% revenue growth and a 17% to 23% increase in earnings per share in the coming quarter.

The impressive balance sheet and consistent cash flow from the company continues to impress investors, particularly those giving the company its five-star rating in CAPS. Of the 947 investors rating the company, a nearly unanimous 939 give it the thumbs-up to beat the market in the future. Out of these, Sun also has 215 All-Star investors bullish on the company, with many citing the strong track record of management and superior financials.

What you see is what you get
Up until the end of 2005, things were looking picture-perfect for visual and audio content licensor Getty Images. Then the picture started to get ugly, and 2007 turned out to be a dud, as growth slowed and management's outlook turned dim.

After evaluating its options, management decided to explore strategic options (read: sell out to the highest bidder) in January, as the company expected earnings to, at best, only meet 2007 levels. For a short while, it appeared as if no one wanted to pay enough for the company until private-equity firm Hellman & Friedman stepped in with a $2.4 billion bid. Getty Images stock trades below the $34-per-share offer, though, an indication that investors see the deal at risk. In CAPS, investors still generally hold a bullish view -- 94% of the 260 investors rating the company giving it a thumbs-up.

What's your story? Whether you buy the tale of a soaring or a souring stock, your own research is more important than collective opinions. But these collective opinions can make your due diligence a whole lot easier.

Add your take on these or any of the 5,500 stocks that our 89,000-plus investors have covered in Motley Fool CAPS. It's totally free to be a part of the community, and the payback is more than worth it.