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) |
|---|---|---|---|
|
Western Digital |
65% |
0.6% |
**** |
|
Apache |
62% |
0.3% |
***** |
|
Sasol |
57% |
3.6% |
***** |
|
Companhia de Bebidas das Americas |
58% |
3.1% |
**** |
|
Annaly Capital Management |
63% |
0.4% |
*** |
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.
When Mr. Market gives you lemons ...
Well, when those are mortgage-backed lemons, apparently your best bet is Income Investor favorite Annaly Capital Management. While pretty much anybody with even a sideways relationship to the housing or mortgage market has been slaughtered recently, Annaly has been flying.
Annaly's business is pretty straightforward. It borrows money, buys a broad array of investments -- including mortgage-backed securities like mortgage passthroughs and collateralized mortgage obligations -- and keeps the interest-rate spread. What sets the company apart from many others in the industry, though, is its investment savvy. Over the past few years, while many investors chased questionable paper in search of yield, Annaly stuck with the good stuff -- all of the mortgage-backed securities that the company owns are backed by Freddie Mac
This conservative focus has helped the company continue producing solid results and sent the stock soaring. To boot, the stock is currently yielding nearly 7% -- not bad when 10-year treasuries are paying less than 4%.
On CAPS, All-Star AJL203PSU -- who is up more than 70 points on his Annaly recommendation -- noted the solidity of the company's portfolio back in February of last year:
The bulk of [Annaly's] lending comes from US [government MBS] ... Meaning that they are backed by the full faith and credit of the US. Annaly has a margin of safety built into its lending unlike [Novastar] and [New Century]. I think Annaly has been unfairly lumped in with the rest of subprime garbage.
So do you think Annaly deserves a place on your All-Star team? You can share your thoughts, or check out more of what your fellow Fools had to say about it (or any of the other stocks above!), by stopping by CAPS. And while you're there, you can also take a peek at few more of the 5,000 other rated stocks.
I think I heard a "boo-yah" somewhere out there -- thanks, Stuart Scott!
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