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 Change
|
Percent Below 52-Week High
|
CAPS Rating (out of 5)
|
|
RPC
|
51.3%
|
3.3%
|
****
|
|
K-Tron International (Nasdaq: KTII )
|
48.3%
|
3.4%
|
*****
|
|
Westinghouse Air Brake Technologies
|
40%
|
4.6%
|
*****
|
|
Western Union (NYSE: WU )
|
35.5%
|
1.9%
|
*****
|
|
Health Care REIT (NYSE: HCN )
|
43.4%
|
4.2%
|
*****
|
Sources: Yahoo! Finance; Capital IQ, a division of Standard & Poor's; and CAPS as of July 28.
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.
Wire in some Western Union
With the U.S. economy struggling, the place to be these days is the global market, and with more than 350,000 agent locations in 200-plus countries, Western Union is there in spades.
Financial services is not a fun place to be these days. Increasingly strapped consumers who borrowed big in the past few years are now shouting "psyche!" and leaving their lenders with fat write-offs. Reports from companies like Merrill Lynch (NYSE: MER ) and Wachovia (NYSE: WB ) have made sure that investors expect nothing but the worst from those who deal with money.
But don’t you dare lump Western Union in that group. It may provide financial services, but instead of taking on credit risk, it merely collects fees for the money-transfer services it provides. This business model led to some nice second-quarter results and a higher outlook for the rest of the year. In fact, the numbers were so good that they caused fellow Fool Alex Dumortier to ask whether Warren Buffett would regret selling the Western Union shares that Berkshire Hathaway (NYSE: BRK-A ) held.
The optimism is no lower on CAPS -- only 29 of the nearly 1,000 members who have rated the stock think it'll lag the broader market. One of those bullish members, wolfhounds, gave the stock a thumbs-up toward the end of June, saying:
This stock may be at its 52 week high, but it's a near perfect company for this market. It operates in almost every country in the world providing cash transfers with little capital investments required. It's simply a cash machine that will benefit from its growth in China and India. With no financial exposure and growing cash flows, it's priced much lower than similar companies like Mastercard and Visa (NYSE: V ) .
Fielding your team
So do you think any (or all!) of these companies deserve a place on your All-Star team? You can share your thoughts on them, or check out more of what your fellow Fools had to say about any of the stocks above, by stopping by CAPS. And while you're there, you can also take a peek at few more of the 5,500-plus rated stocks.
I think I heard a “booyah!” somewhere out there – thanks, Stuart Scott!
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