The game's on the line. The clock's ticking down. Which teammate would you trust to sink a winning shot?
You could dish the rock to your resident superstar -- but what if he's playing ice-cold at the moment? Instead, you pass to the guy with the hot hand, the one who'll be deemed en fuego tomorrow on ESPN.
Momentum investors look 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 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 company 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 |
|
|---|---|---|---|
|
Potash Corp. of Saskatchewan |
207% |
2.7% |
**** |
|
Transocean |
75% |
3.5% |
***** |
|
Southwestern Energy |
75% |
4.3% |
***** |
|
Steel Dynamics |
71% |
3.5% |
***** |
|
Praxair |
38% |
4.3% |
***** |
At first glance this looks like a high-quality group. But, as always, I highly advise taking a really close look before you throw a bounce pass in the direction of any of these stocks.
Rigging up your portfolio
A bullish case for contract driller Transocean might sound like this:
[Transocean] has a terrific market position in deep sea drilling. Competition is not a problem, as speedy availability for their deep sea rigs is more important than (their high) pricing. [Transocean has] a deliberate, disciplined and opportunistic expansion program, getting out of the crowded shelf drilling business and into more profitable deep sea. ... The continuing weak [dollar] and the extensive international exposure will help too. The stock is cheap with a terrific growth rate particularly after the integration of GlobalSantaFe. What is not to like here?
Well, actually, that was a bullish case for Transocean from CAPS player freefall51, who likes the stock so much that he said: "If I were to choose one stock -- just one -- this is it."
Freefall isn't the only investor that feels strongly about Transocean either. More than 2,700 investors on CAPS have predicted that the stock will outperform the S&P 500 versus a measly 57 that think it will trail the index.
Right now the stars seemed to be aligned for business success at Transocean. With oil prices at nosebleed levels there's a very obvious incentive for the big boys of the industry -- think Chevron
The catch these days is that those in search of oil have had to go farther and wider to come up with new finds. This is great news for Transocean, because its specialty is accessing oil in hard-to-get-at places, like 7,500-plus feet down in the ocean.
Transocean owns a fleet of drill rigs -- 139 as of February -- and it contracts out these rigs along with work crews and its drilling expertise to companies that are trying to find or access oil and gas. Over the next few years investors will likely see the company continue to conservatively add to its drilling fleet while continuing to lock up its rigs in very profitable contracts.
A big drop in oil prices would certainly put a dent in Transocean's business, as new drilling would slow down and current customers may try to pull out of or renegotiate contracts. For the time being, however, lower oil prices unfortunately seem as likely as an uncontroversial Barry Bonds.
Do you think Transocean deserves a place on your All-Star team? You can share your thoughts on it, or check out more of what your fellow Fools had to say about it or any of the other stocks above, when you visit CAPS. And while you're there, you can also take a peek at few more of the 5,500-plus other stocks rated by our community.
I think I heard a boo-yah somewhere out there -- thanks, Stuart Scott!
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