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? 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 alone 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.
Now is an undoubtedly tough time to search for winners out there. In hopes of finding the current league leaders, I ran a simple momentum screen on our Motley Fool CAPS screener. Each of the companies below was up a double-digit percentage over the past four weeks -- well above the S&P's slight gain -- and has been rated highly by CAPS players.
|
Stock
|
Four-Week Change
|
12-Month Change
|
CAPS Rating (Max 5)
|
|
Chesapeake Energy (NYSE: CHK )
|
43.3%
|
(41.2%)
|
*****
|
|
UnitedHealth (NYSE: UNH )
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23.6%
|
(41.5%)
|
*****
|
|
AT&T (NYSE: T )
|
22.5%
|
(29.9%)
|
****
|
|
NVIDIA (Nasdaq: NVDA )
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19.8%
|
(75.5%)
|
****
|
|
Verizon (NYSE: VZ )
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13.9%
|
(28.7%)
|
****
|
Sources: Yahoo! Finance, Capital IQ, a division of Standard & Poor's, and CAPS as of Nov. 10.
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 Chesapeake Energy. Why do investors love Chesapeake lately? Let me count the ways.
1. They love the earnings
The day before Halloween, Chesapeake announced earnings that were scarily good. Even though the price of natural gas fell off substantially, Chesapeake reported adjusted net income of $486 million, an increase of 47% over the prior year. And that's after backing out a $2.8 billion gain on its future period hedges.
2. They love the asset sales
Recently, the company has been working hard to make its balance sheet more conservative. It has sold billions of dollars' worth of interests in various properties to the likes of StatoilHydro (NYSE: STO ) , Plains Exploration & Production, and BP (NYSE: BP ) .
3. They love the buyout rumors
Speaking of BP, rumors have been circling that Chesapeake could be the subject of a buyout offer from a larger energy player. BP's one of the potential suitors mentioned. These kinds of rumors are always highly speculative, but they've definitely helped inject some life back into Chesapeake's beaten-down shares.
Looking ahead
There's no question that CAPS members love, love, love Chesapeake. Of the 5,970 members who have rated the stock, 5,825 think it's an outperformer. More than 96% of the CAPS All-Star players who have rated it also think the stock will outpace the S&P 500. One of those All-Stars, DemonDoug, chimed in back in late September, highlighting how cheap the stock has gotten:
Now this is what I like to see. Blood on the streets!!! It's a hurricane of bloodied companies that are solid money makers blowing past their 52 week lows, and I'm bullish when the market gets that bearish when the fundamentals are still sound.
For all the positive tone surrounding the company lately, there is a very big recent strike against it. Back in early October, Chesapeake CEO Aubrey McClendon, formerly the largest individual owner of Chesapeake stock, disclosed that margin calls forced him to sell almost his entire position -- more than 30 million shares, according to SEC Form 4 filings.
Some CAPS members have seen the bright side to this unfortunate event, pointing out that the stock successfully weathered such a massive selling spree. It's also notable that McClendon made it very clear that he was selling his shares strictly because of the margin call, not because his opinion of the company's future had changed.
However, investors still have to ask themselves what this says about Chesapeake's CEO. If he's willing to gamble this way with his own money, how does he view Chesapeake's financial position?
Fielding your team
Do you think any (or all!) of these companies deserve a place on your all-star team? You can share your thoughts on Chesapeake, or check out more of your fellow Fools' opinions on it or any of the other stocks above, by stopping by CAPS. While you're there, you can also take a peek at a few more of the 5,400 other stocks that are rated on CAPS.
I think I heard a booyah somewhere out there -- thanks, Stuart Scott!
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