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 recent buyout offer that investors didn't anticipate sends a stock soaring. For instance, Walgreen's (NYSE:WAG) recent $750 million offer for pharmacy service provider Option Care (NASDAQ:OPTN) caused the latter's stock to jump 25% in a single day. But beyond these somewhat unpredictable surges, the market contains stocks with a fundamentally compelling story behind their recent momentum. The hard part? Sifting through the daily trading and news-driven gyrations to find them.

Luckily, Motley Fool CAPS is not only a great tool 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 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 $100 million market capitalization, and those with a beta greater than 3. This will help keep us out of the wild, pump-and-dump land of penny stocks. Here's a broad sampling of stocks that our screen returned today:

Let's sift further through this list of the past month's market-thumping stocks, 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 each company. A company's star ranking also has a history, tracking its rise or fall in the investing community's favor. The CAPS system also weights the opinions of the best-performing investors more heavily than their underperforming rivals, ensuring that a company's ranking is most strongly influenced by investors who've already proved their mettle.

Speaking of metal (more or less), our list is topped by the largest producer of aluminum in China, Aluminum Corporation of China, or Chalco for short. Chalco has been on an M&A spree recently, consummating a deal to acquire Peru Copper (AMEX:CUP) early in June, followed by another deal to merge with sister company Baotou Aluminum. CAPS investors like the company's strategic efforts to scale itself up for competition on a global playing field of giants such as Alcoa (NYSE:AA).

Wall Street's equally bullish. Goldman Sachs upgraded the company, citing strong demand for aluminum in the burgeoning Chinese economy. CAPS investors still like the valuation of the company with respect to future growth, and a near-unanimous 1,147 out of 1,171 investors rating the stock give it the thumbs-up today.

A few biotech companies on our list have also seen some positive momentum in the past month. Generex Biotechnology, when develops drug-delivery technology, recently received a big vote of approval, as Wall Street firm Rodman and Renshaw initiated coverage on the company with an 18-month price target of $6 per share. No big deal -- except that the stock was only trading around $1.30 at the time of the announcement.

Investors seem most excited by the prospects for Generex's oral insulin product, which will start phase 3 trials later this year, with possible marketing approval by late 2009. Many CAPS investors see tremendous risk in this tiny biotech company, but they're intrigued enough by the promise hiding in the pipeline of drug-delivery solutions for diabetes to weigh in on the bullish side. Thirty-six of the 40 CAPS All-Stars who've rated the stock believe it will outperform the market going forward.

There's a one-star CAPS bottom-dweller also showing up on this week's list: fuel cell developer Ballard Power. The company has a long and storied history; in its euphoric 1990s heyday, the stock soared more than 30-fold on the prospects of efficient hydrogen fuel cells. Today, it suffers continued losses on falling revenue. Though the stock has bounced back by nearly 30% in the last month on no news, many CAPS investors still see the company as a lousy investment. Even the nation's renewed focus on alternative energy and "green" fuel hasn't swayed 73% of CAPS All-Stars who've rated the stock from giving it a thumbs-down.

What's your story?
Whether or not you believe a stock is soaring or souring, your own research matters most. Thankfully, CAPS' collective opinions make each Fool's individual job of due diligence much easier.

Step right up and chime in with your own take on these or any of the more than 4,700 stocks covered in Motley Fool CAPS. It's totally free to be a part of this story, and the payback is more than worth it.

ISIS Pharmaceuticals is one of many stocks tagged in CAPS for close scrutiny in the Rule Breaker Universe. To learn more, take a free 30-day trial to Motley Fool Rule Breakers.

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