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. For instance, regional wireless-service provider MetroPCS' (NYSE:PCS) $5.5 billion stock offer for Leap Wireless (NASDAQ:LEAP) caused that stock to surge more than 15% in a single day. But beyond these somewhat unpredictable surges, there are stocks out there 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 on Wall Street that we track 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 of 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.

Zoom, zoom
Teen-apparel and action-sports retailer Zumiez has found itself a new groove these days -- one that is sending shares soaring. The company started its roll to higher ground by reporting June comparable sales of 13.7%, but it really kicked things into gear when it followed that up with a strong July, when it clocked in with 9.7%, and an even stronger August, with a whopping 17.4% comps increase. The cherry on top was second-quarter earnings in which the company not only reported a 47% increase in sales and a 90% increase in net profit but also bumped up yearly guidance.

While shares in Zumiez have more than doubled in the past year, the stock has been extremely volatile. This trait is not uncommon to trendy retailers, but what keeps Zumiez on the see-saw is a rich valuation. With its price-to-earnings ratio north of 60 and a forward earnings multiple of  36, many investors in the CAPS community are reading from the "great company, not-so-great stock" handbook because of the premium on the shares. In my mind, though, Zumiez deserves a generous multiple, because of its ability to ring up increased sales when some other retailers are struggling and marking down inventory just to get it off the books.

Name your (share) price
Online travel portal and Motley Fool Stock Advisor recommendation Priceline.com has also seen a surge in shares lately, thanks to an impressive second-quarter earnings report that trumpeted a 33% increase in gross bookings. The approximately 20% boost in increased net-income guidance that the company gave for the full year also shows that Priceline sees more and more travelers coming to the site looking for deals. That's particularly true for its international property, Booking.com. Things are looking awfully good at the one-time dot-com darling, with both gross and operating margins continuing to expand quarter after quarter.

But this story is somewhat of a rerun of Zumiez -- while investors have enjoyed the run-up in shares, a few are concerned that William Shatner's head has gotten too big. (In other words, shares are overvalued). Only seven of 100 CAPS All-Stars give the stock the thumbs-down at this point, but all of the bearish pitches on the company include concerns about a premium price on shares. But this was the case last year, before the stock rose almost 150% and reminded us that a company on fire can indeed keep going higher.

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.