More Than Momentum: Stocks Rising for a Reason

Even on the market's worst days, buyout news and other short-term forces can send individual stocks up by 10%, 25%, even 50%. For example, a major new polysilicon contract for solar supplier Trina Solar (NYSE: TSL) sent its stock up by 15% in one day while boosting shares in peers Suntech Power (NYSE: STP) and Solarfun Power (Nasdaq: SOLF) by 13% and 18%, respectively.

But beyond one-time blips like this are stocks with fundamentally compelling reasons for recent momentum. The trick is to find those stocks. That's where Motley Fool CAPS comes in.

The story behind the story
CAPS is no crowd of lemmings. Its best-performing investors' opinions do more to shape each company's rating than the picks of their poorer-performing peers do. Let's use the collective wisdom of more than 95,000 CAPS investors to filter out the noise and find companies displaying strong momentum.

We'll screen for companies with a stock-price increase of at least 25% in the past month, a market cap of greater than $100 million, and a beta of less than 3. That'll keep us clear of the wild, pump-and-dump land of penny stocks.

Here's a sample of stocks our screen returned:

Return data is calculated as the difference between the closing price on Feb. 29 and the closing price on April 1, as per MSN Money's screen. Star rankings from CAPS.

Let's burrow down through this list of stocks that have thumped the market in the past month and find out the story behind the numbers.

Feeling a little more secure
Little more than a month ago, shares of information security specialist VASCO Data Security went into a free fall after a disappointing fourth-quarter earnings report. While 2007 turned out to be an outstanding year for VASCO, management was not happy to see three significant contracts delayed into 2008, producing a significant hit on earnings.

After dropping the stock nearly 40% in a single day, investors have lately been warming up to VASCO again, likely tempted by a fundamentally strong growth company trading well below the growth rate of 27.5% projected by analysts. Even today, VASCO has a forward earnings multiple of a little over 21. With the company expecting 25% to 35% revenue growth in 2008, maintaining the growth Wall Street expects shouldn't be too tough.

Many CAPS investors have weighed in recently with the opinion that the depressed stock presents a great opportunity to buy VASCO at a great price. And even though the stock has been a short-term loser, more than 98% of the 1,768 investors rating the company maintain that it will beat the S&P in the long run.

Not so bad after all
Another company showing recent momentum after a significant fall is wireless application software developer Smith Micro. After earning the scorn of analysts with its third-quarter report late last year, the company announced a sizeable merger that will help it diversify its customer base -- an issue the company has wrestled with for years.

But investors were not in a buying mood until fourth-quarter earnings showed that better days may lie ahead. While the company will be distracted with the integration of PCTEL's mobility group -- and expenses will go up somewhat because of it -- the continued adoption and use of Smith Micro's mobile products should lead to at least 30% revenue growth in 2008, according to the company.

CAPS investors generally favor this small cap to outperform the market as well. Of the 164 CAPS All-Stars rating Smith Micro, 158 are bullish on the company.

What's your story? Whether you buy the tale of a soaring or a souring stock, your own research is more important than collective opinions. But these collective opinions can make your due diligence a whole lot easier.

Add your take on these or any of the 5,500 stocks that our 95,000-plus investors have covered in Motley Fool CAPS. It's totally free to be a part of the community, and the payback is more than worth it.