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, despite its reliance on debt quality, shares of Ambac Financial (NYSE:ABK) gained nearly 42% in a single day last week, on news that bond insurer MBIA would reinsure more than $180 million in municipal bonds.

But beyond less-predictable events like that one 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 members' opinions do more to shape each company's rating than the picks of their poorer-performing peers. Let's use the collective wisdom of more than 115,000 CAPS investors to filter out the noise and find companies offering strong momentum.

We'll use CAPS' handy stock screening tool to quickly zero in on companies with a stock price increase of at least 25% in the past four weeks, a market cap of greater than $100 million, and a beta of less than 3.

Here's a sample of stocks our CAPS screen returned:

Source: Motley Fool CAPS. Price change from Aug. 1 through Aug. 29.

With our list of screened stocks pulled up in CAPS, it then only takes a single click on individual companies to get some context behind the recent momentum.

Quality Systems
Investors have continued their "flight to quality" and recession-proof companies, and health care continues to be a favorite lately, for good reason. Health-care software specialist Quality Systems has been showing that the lean times haven't hurt it -- its biggest division, NextGen, increased its revenue by 34% in the latest quarter.

That increase by NextGen -- the division supplied 93% of Quality Systems' revenue -- helped the company's first-quarter profits jump 38% from a year earlier, also helping propel the stock to new 52-week highs. With about 80% of U.S. doctors still using paper records, Quality Systems has plenty of opportunity to convince them to join the others who have already switched to electronic health records (EHR). The company has a new CEO who hopes to capitalize on loosened federal rules that make it easier for hospitals to subsidize purchases of EHR systems.

Quality Systems will share more of the profits with shareholders, too; it recently hiked its dividend by 20%. With good performance today and the prospect for more growth, more than 97% of the 2,080 CAPS members rating Quality Systems believe it will outperform the market.

Clean Energy Fuels
While shale players like XTO Energy (NYSE:XTO) and Chesapeake Energy battle it out to outdrill one another in onshore natural gas exploration, T. Boone Pickens has his own plan for alternative uses of natural gas supplies. And one of his investments -- Clean Energy Fuels -- is in a race to put natural gas in a service station near you. Clean Energy is the largest natural gas provider for transportation in North America, and it wants to encourage the use of natural-gas-powered autos.

With Honda (NYSE:HMC) making the only natural-gas-fueled auto currently available in the U.S., Clean Energy could grow considerably if California Proposition 10, or the California Alternative Fuels Initiative, is passed in November. Under the proposition, the state would issue $5 billion in government bonds to fund rebates and research spending on natural gas alternatives. Pickens and Chesapeake Energy's CEO have already contributed a total of $3.7 million in support of the initiative. With big backers moving forward for natural gas in vehicles, nearly 97% of the 604 CAPS members rating Clean Energy Fuels believe it will beat the market.

And you?
What's your story? Whether you buy the tale of a stock that's soaring or souring, 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 115,000-plus members 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.