The clock's ticking down, your team's down one, you're being double-teamed, and you wouldn't have enough time to get off a good shot even if you were allowed to drop-kick both defenders. So who do you dish the rock to?
Your first thought might be the resident superstar -- the Kobe Bryant or LeBron James. But what if Kobe, as good as Kobe is, is playing colder than an Alaskan snowdrift? That's right, you dish to the guy with the hot hand, the guy who will be deemed en fuego tomorrow on ESPN.
Momentum investors are looking for stocks in a similar state of sizzle when they make investments. They want to give the nod to the stocks that are hot to the touch.
But momentum by itself will only get you so far. What sounds more interesting to me than simply looking for stocks that have momentum is finding high-quality stocks that also have some positive inertia on their side. It's like kicking the ball out to Michael Jordan or Larry Bird when they do have a hot hand.
To find these high-quality winners, I cross-referenced a pretty simple momentum screen with data from The Motley Fool's new investing community, CAPS. The result is a starting line-up of all-star stocks that all currently have a fiery shooting hand. Each of the companies below is up 30% or more over the past year, is 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) |
|---|---|---|---|
|
Cepheid |
133.5% |
3.5% |
*** |
|
Medarex |
79.4% |
3.6% |
**** |
|
inVentive Health |
38.4% |
4.6% |
***** |
|
Stryker Corp. |
40.2% |
4.8% |
***** |
|
Rofin-Sinar Technologies |
33.4% |
2.7% |
***** |
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.
Digging deep
When the market was still chugging up, up, and away, it was pretty easy for me to find a group of high-quality hot stocks. That's not quite the case anymore. When the near-term outlook gets cloudy like it is now, investors have a tendency to rethink what they're holding, and -- for right or wrong -- the hottest stocks often get a haircut as investors take profits.
But some stocks, like the ones listed above, just can't help but continue to do well. So what makes a stock that holds up through market weakness? One helpful attribute is if the company is addressing a large and growing market that will have high demand even through tough economic conditions.
You could say that Stryker, which makes joint replacement products and surgical equipment, falls into this camp. With a huge wave of baby boomers crashing their way into older age and retirement in the U.S., there promises to be a huge source of demand for Stryker's highly regarded products for years to come. And that demand will be less sensitive to economic changes than, say, sales of big-screen LCD TVs.
But taking a hard look at Stryker isn't betting on the come, either -- the company has been putting up strong results for years now. While fellow Fool Ryan Fuhrmann believes that the best time to pick up Stryker shares was more than a year ago, when the industry was facing some tough questions, he also recently highlighted how well Stryker has been doing.
There's more than a healthy dose of bullishness on the stock in CAPS, where all 152 All-Stars who have rated the stock have given it the thumbs-up. One of these All-Stars, rpanton, calls Stryker a "strong company with solid balance sheet and solid owner earnings," and notes that it has been expanding its net margin since 1999. He also points out the "solid inside ownership" and the favorable demographic trends.
So does Stryker deserve 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 4,900 other rated stocks.
I think I heard a "booyah" somewhere out there -- thanks, Stuart Scott!
More CAPS Foolishness:
inVentive Health and Rofin-Sinar are Motley Fool Hidden Gems picks. You can check out any of our newsletters free for 30 days.
When it comes to basketball, Fool contributor Matt Koppenheffer might be the guy Ron Shelton was thinking of when he came up with the title White Men Can't Jump. He does not own shares of any of the companies mentioned. The Fool's disclosure policy has a 55'' vertical jump and can dunk from half court. Or so I hear.
