More Than Momentum: Stocks Rise for a Reason

Even on the market's worst days, we see headlines and ticker feeds touting 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 example, the Tishman Speyer and Lehman Brothers (NYSE:LEH) offer to buy REIT Archstone Smith (NYSE:ASN) for $60.75 per share juiced the stock by roughly 20% from the price before rumors of the deal circulated. 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. The Motley Fool CAPS system is a great tool not only for finding and screening stocks, but also for getting a quick read on the fundamental story behind a company. 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 30,000 rated 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:

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
One advantage of CAPS is that it 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 as many still favor it after the run-up. A company's star ranking also has a history, showing whether a company has been rising or falling in favor with the investing community.

And lest you think keying off CAPS ranks is equivalent to following a crowd of lemmings, note that the CAPS system weights 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 better than the average dart-throwing monkey.

In looking at the biggest gainer on our list, Odyssey Marine, we find a company whose sole purpose is to find shipwrecked treasure in the depths of the ocean. And the reason for the dramatic 55.4% rise? You've probably heard the story by now. Odyssey Marine made a huge find aboard an undisclosed shipwreck located in the Atlantic Ocean, including gold and silver coins estimated to be worth $500 million.

But CAPS investors have maintained a low one-star rating on this treasure hunter for a few reasons, mainly because of the high risk of an unpredictable revenue stream and uncertainty around ownership of the recently found treasure. The Spanish government has steadfastly held that the recent find was in its waters, making all the property recovered rightfully theirs. With this cloud hanging over the company, almost 40% of CAPS investors see no silver lining here and have given the company the thumbs-down.

Another bottom dweller in the CAPS database is biotech firm Dendreon, which now owns a one-star rating after months of turmoil in the process of getting its lead cancer compound Provenge approved to market. Investors have since bid the company's shares back up, 31.6% in the past month, in the hopes that the issues surrounding FDA approval can be worked out. It's not enough in the book of many CAPS investors though -- 89 out 211 All-Stars giving and opinion on the company are bearish about Dendreon's future prospects.

Our lone five-star company on the list today, Telvent GIT, is a different story. The company is based in Spain but operates around the world providing mission critical information technology services to a diverse base of customers in industries such as energy, traffic, transportation, and environmental management. A solid first quarter, announcement of a dividend, and continued success in winning contracts for services has fueled Telvent's rise in the past month. Amazingly, not even one out of 80 CAPS investors voting on Telvent has panned the company, giving a unanimous thumbs-up to the global IT player.

What's your story?
Ultimately, the only story that counts is your own. Whether or not 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 opinion on these or any of the more than 4,600 stocks covered in Motley Fool CAPS. It's totally free to be a part of this story, but the payback is more than worth it.

Dendreon 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 of the Motley Fool Rule Breakers service.

Fool contributor Dave Mock has his own story. 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.