5 All-Star Stocks on Fire

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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 10% 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)
Perrigo (Nasdaq: PRGO)	84.9%	8.4%	****
ManTech International	55.8%	9.6%	*****
Westwood Holdings Group (NYSE: WHG)	41.1%	9.2%	*****
SeaChange International (Nasdaq: SEAC)	38.6%	2.5%	****
Hawaiian Electric Industries (NYSE: HE)	34.9%	1.5%	****

Sources: Yahoo! Finance; Capital IQ, a division of Standard & Poor's; and CAPS as of Sept. 29.

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. In fact, I'll even kick off your research with a look at Hawaiian Electric.

Providing the pep
For obvious reasons, it's not exactly easy to find stocks that have navigated the market's recent bloodbath and are still anywhere near their highs. So what black magic does Hawaiian Electric have working for it? Well, I'm sure it helps that its primary revenue-generating business -- and namesake -- is its steady electric-utility operations.

That can't be the whole story, though. After all, electric and diversified utilities on the mainland, like Duke Energy (NYSE: DUK) and ConEdison (NYSE: ED), aren't hitting new highs, and that's despite the fact that both currently sport a higher dividend yield than Hawaiian Electric. Investors may, however, see Hawaiian Electric's island market as more stable and dependable than utilities on the mainland. We also can't discount the fact that the company has been benefitting from a rate increase which helped it more than double its utility earnings in the second quarter.

Looking ahead
I have a confession: There's something I haven't told you about Hawaiian Electric. Despite its name, the company has historically generated more than half of its earnings from ASB, its banking subsidiary. Does this mean it's a potential Wachovia (NYSE: WB) in the making? Not quite. Wachovia's destruction came at the hands of wacky pick-a-payment loans and an ill-timed acquisition of California's Golden West Financial. Though Hawaii did see property prices run up with the rest of the country, it's held up much better during the crash. More importantly, though, ASB was more conservative about its lending, and nearly all of its residential lending was fixed-rate.

Combine that conservative bank with the stability that the utility provides and you've got what many CAPS members consider a good opportunity. Back in March, Hawaiian Electric fan Fallen001 chimed in with his bullish thoughts:

I lived in [Hawaii] for a period of time and they are the only thing going out in the state .. .constant customer base and gains from the lack of a heating season ... A/C on all the time at most commercial establishments ...

Safe stock in a time of economic duldrums ... Nice yield ... forget bonds, this is the safe stock if you're close ot retiring ... plus, the price can't be beat ...

Of course, this says nothing about the company's current valuation. As intriguing as the business is, the current earnings multiple of more than 17 times full-year 2008 earnings is a bit high for the businesses we're talking about here. So while the stock may continue to be able to push against the market's woeful tide, we're definitely not looking at a cheap stock.

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, by stopping by CAPS. And while you're there, you can also take a peek at few more of the 5,400-plus other rated stocks.

I think I heard a “booyah” somewhere out there -- thanks, Stuart Scott!

More CAPS Foolishness:

• America's Next Top Value Stock
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On Oct. 7, 2008, Fool co-founder David Gardner and his Motley Fool Pro team will invest $1 million in a portfolio designed to help you make money in any market. In the coming weeks, the team, relying heavily on proprietary CAPS "community intelligence" data, will establish long and short positions in a broad range of securities, including common stocks, publicly traded put and call options, and exchange-traded funds (ETFs). To learn more about Motley Fool Pro and to receive a private invitation to join, simply enter your email address in the box below.