More Than Momentum: Stocks Rising for a Reason

Even on the market's worst days, headlines and ticker feeds tout soaring stocks. Some juicy rumor or biotech wonder drug seems to be reason enough for a stock to climb 10%, 25%, even 50% -- sometimes in a single day. Sometimes the companies are familiar, but many are names and stories entirely unknown to investors.

Often, news of a buyout offer that investors didn't anticipate sends a stock rocketing. Computing and printing giant Hewlett-Packard's (NYSE:HPQ) $1.6 billion offer for Opsware (NASDAQ:OPSW) caused the stock to jump more than 36% in a single day. But beyond these somewhat unpredictable surges, there are stocks with a fundamentally compelling story behind their recent momentum. The difficulty comes in sifting through the daily trading and news-driven gyrations to find them.

Luckily, there's help right at your fingertips. Motley Fool CAPS is a great tool not only for finding and screening stocks, but also for getting a quick read on the fundamental stories behind them. In addition, investors can quickly see just who -- from the big names we track on Wall Street to the regular Joes on Main Street -- is bullish or bearish on the company, and why.

The story behind the story
Let's dig right in, using the collective wisdom of more than 60,000 CAPS investors to look past the splashy news and find companies showing strong recent momentum.

We'll screen for stocks showing at least 30% price appreciation in the past month. Then we'll weed out stocks with less than a $100 million market capitalization, and those with a beta -- the degree to which they differ from the market's overall course -- greater than 3. This will help keep us out of the wild, pump-and-dump land of penny stocks. Here, then, is a broad sampling of stocks that our screen returned today.

Now let's sift further through this list of stocks that have thumped the market over the past month -- and find out why they've performed so well.

The method behind the madness
CAPS contains a searchable record of investors' opinions and comments about a company's fundamentals, value, and prospects at any given time. Users can see what other investors were saying about a company before a huge surge in price, and whether those investors still favor it after the run-up. A company's star ranking also has a history, showing whether that company has been rising or falling in the investing community's favor.

Lest you think that keying off CAPS ranks is equivalent to following a crowd of lemmings, note that the CAPS system weighs the opinions of the best-performing investors more heavily than those who haven't done so well. Thus, a company's ranking is influenced more strongly by investors who have already proved themselves better than the average dart-throwing monkey.

Axsys of motion
A favorite among CAPS investors, precision optics manufacturer Axsys Technologies holds a five-star rating. Forty-three investors unanimously believe that the company will beat the S&P going forward. Investors like that the company is relatively unknown in sectors with growing demand: security, surveillance, and military applications. The company has seen strong demand for its products in applications such as military satellites and airborne targeting systems.

Axsys shows up on our momentum screen this week because of increased guidance earlier in the month, coupled with the proposed sale of one of its two business units. The distributed-products business unit manufactures precision ball bearings and bushings, but it's not considered a strong strategic asset to the company.

Selling that business will help Axsys pay down debt and let the company focus on the booming business line of precision optics and surveillance systems. In fact, the optics business is so good that it will more than make up for lost earnings from the eventual sale of the bearings division. The company's recent earnings report also gave the stock a boost, treating investors to 28% top-line growth and a 47% increase in net earnings. Evidence of increased demand for components and systems also showed up in a 5% sequential increase in backlog for Axsys.

Smooth sailing ... again
Wall Street's latest "Love Boat" is sailing again. Just last week, we profiled a dry bulk shipper, Diana Shipping, based on its recent momentum. This week, we've got two more on the list, treating even the most scurvy landlubbers to sizable gains in these hot stocks.

Shares of both Excel Maritime and Genco Shipping have been hitting all-time highs recently, on news that they are expanding their respective fleets to keep up with shipping demand. Genco recently announced that it will double the size of its fleet with the $1.1 billion purchase of nine new Capesize ships. Excel Maritime plans to buy two Supramax bulk carriers for $126 million, recently filing a $500 million debt offering to help pay for the expansion.

Charter rates for the delivery of coal, steel, cement and other bulk materials have been soaring as demand to move goods continues to outstrip the available space on ships. But some investors think the euphoria is overdone in shipping stocks, and that valuations have run up too far, too fast. Efforts are also under way in many nations to relieve port congestion, which will curtail historically high shipping rates and could sink the stock of many a chipper shipper.

What's your story?
Ultimately, the only story that counts is your own. Whether you buy the story of a soaring or souring stock, your own research is more important than collective opinions. But thankfully, these collective opinions make an individual's job of due diligence much easier.

So step right up and chime in with your own take on these or any of the more than 4,900 stocks that investors have covered in Motley Fool CAPS. It's totally free to be a part of this story, and the payback is more than worth it.

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Fool contributor Dave Mock has his own story, but he won't bore you with the details. He owns no shares of the companies mentioned here. Dave is the author of The Qualcomm Equation. The Fool's disclosure policy has the momentum of a freight train, but it can stop on a dime.