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. It took Rupert Murdoch's News Corp. (NYSE:NWS) months to finally seal the deal with Dow Jones (NYSE:DJ) for $5.6 billion, but stock in Dow Jones jumped almost 55% when the deal was first announced in May. 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 20% 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 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 the resulting stocks 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.

Blood in the water
Blood-transfusion equipment supplier Immucor has seen its red chart turn green lately. Stock in the company surged in the past month, thanks to healthy fiscal fourth-quarter earnings. Topping an already impressive third-quarter report, the company announced a 22% revenue increase, stemming largely from increased pricing to customers. The boost in prices brought gross margin up as well, to a record 73.7% compared with 68.4% in the prior-year quarter.

Investors lying on the table for Immucor saw shares get another shot in the arm this past week, when the company announced a supply deal with the American Red Cross. The agreement puts 19 of the company's Galileo systems in five Red Cross laboratories, where they will consume Immucor reagents as they screen donated blood. The company expects this ongoing supply of high-margin reagent supplies to yield at least $5 million a year. Overcoming any prospective fear of needles (and a dip in the stock), a majority of CAPS investors have embraced all these sanguine developments; more than 97% of investors rating the company think Immucor will beat the S&P going forward. The many reasons cited for the optimism include the dearth of significant competition and consistent top- and bottom-line growth.

Slow motion
You'd think that a jump in a company's shares would elicit friendlier opinions, but not every momentum play garners widespread favor in CAPS. While crude-oil technology developer SulfCo and oil and gas producer Transmeridian Exploration are very popular stocks, many investors in the CAPS community pan the companies for their inherent risks. Both companies have seen losses continue to grow at scary rates, leading more than half of the CAPS All-Stars rating Transmeridian, and a stunning 93% of those rating SulfCo, to give their respective firms the thumbs-down.

Positive news regarding initial prototype tests of SulfCo's heavy oil refining solution in the United Arab Emirates dramatically boosted the stock, but it hasn't stemmed the flow of negative opinions from CAPS investors. The loss restatement that was announced alongside the test news probably didn't help. I'm guessing that last week's filing of a shelf registration statement for a $150 million share offering to pay for operations won't win any investors over, either.

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.

Never swayed by momentum in a stock, the Motley Fool Rule Breakers analysts look for momentum in a business with solid results. To see what selections David Gardner and his team are making today, take a free 30-day trial.

Fool contributor Dave Mock has his own story, but he won't bore you with the details. He owns no shares of the companies mentioned here. Dave is the author of The Qualcomm Equation. The Fool's disclosure policy has the momentum of a freight train, but it can stop on a dime.