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 most investors. Often, news of a recent buyout offer that investors didn't anticipate sends a stock skyward. Western Digital's (NYSE:WDC) $1 billion offer for Komag (NASDAQ:KOMG) caused the latter stock to jump almost 8% 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. 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 stories behind them. 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 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. Setting those limits 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 the price surged, and whether those investors still favor it after the run-up. A company's CAPS star ranking also has a history, so you can see whether a company has been rising or falling in our investing community's favor.

Lest you think that keying off CAPS ranks is equivalent to following a crowd of lemmings, keep in mind 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 themselves better than the average dart-throwing monkey.

At the top of our list, we find oil and gas exploration company Transglobe Energy. The $314 million company has reserves and production operations in Canada and the Republic of Yemen, as well as working interest in 6.8 million acres in those regions. Recent momentum in shares of Transglobe has come from positive updates about its operations in Yemen, where oil is now flowing from successful drills. But CAPS investors had given the company high marks even before the drill-site updates, in a nod to Transglobe's impressive balance sheet and profitable operations. Even following the recent surge, 278 out of 286 CAPS investors still believe the company will beat the S&P going forward.

Meanwhile, online jewelry retailer Blue Nile has been a shareholder's best friend lately. The company's shares have increased their sparkle by almost 35% in the past month alone. Blue Nile has enjoyed a surge of buy orders thanks to impressive first-quarter earnings early in May and subsequent analyst upgrades since. But 80 of the 548 CAPS players ranking Blue Nile are not on such friendly terms -- they're betting the diamond e-tailer will underperform the market in the future. Some investors are concerned about the current valuation, which includes a price-to-earnings ratio of 96 and an enterprise value-to-sales ratio of 4.4. While many onlookers do remain bullish on expanding growth, a few investors are throwing around that dreaded b-word -- bubble.

Rounding out the bottom of our momentum list, with nearly 60% appreciation in the past month, is green technology company Raser Technologies. The Utah-based firm recently disclosed to investors that it's on the short list to supply 30 megawatts of renewable energy to California, and that news sent shares soaring. But in general, CAPS investors are a show-me-the-money bunch and have stuck a lowly one-star rating on this company. Even though Raser paints an impressive picture of efficient power designs and methods, a whopping 89% of CAPS All-Stars cite minuscule revenue and an ongoing cash bleed in their bearish appraisals of the company.

What's your story?
Ultimately, the only story that counts is your own. Whether you buy the story behind a soaring or souring stock, what's most important is your own research. But thankfully, collective opinions such as those at CAPS 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 4,700-plus stocks we cover in Motley Fool CAPS. It's totally free to be a part of this story, and the payback is more than worth it.

The Motley Fool Rule Breakers analyst team has recommended Blue Nile twice. To see what other stocks the crew has singled out for market-beating growth, take a free 30-day trial of the Rule Breakers service. Blue Nile is also a Motley Fool Hidden Gems pick.

Fool contributor Dave Mock has his own story, but 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.