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 largely unknown among investors.

Often, news of a buyout offer sends a stock rocketing, such as what happened when Galenica Group offered $915 million for Aspreva Pharmaceuticals (NASDAQ:ASPV). Aspreva's stock jumped nearly 14% in a single day on the news. 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 the background.

The story behind the story
Let's dig right in, using the collective wisdom of more than 73,000 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 these 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 its investors' opinions and comments about a company, as well as an overall ranking from its investing community. Lest you think this sounds like following a crowd of lemmings, note that the opinions of the best-performing investors are weighted more heavily than those from poorer-performing investors. Thus, a company's ranking is influenced more strongly by investors who have proved to be better than the average dart-throwing monkey.

Easing up
Chinese online-game developer and Motley Fool Rule Breakers recommendation NetEase.com hit the momentum list this week with a strong gain of nearly 35% in the past month. Investors may be thinking every Chinese stock in existence has been on a tear lately, but NetEase was missing the party until recently. Even though it sports the most popular online game in China, NetEase has watched its growth stall earlier this year as competitors launched new titles. But fortunes have been changing lately, as a brisk uptake on its new Westward Journey Online III game led to an analyst upgrade and a subsequent rise in the stock.

The highly anticipated IPO of new entrant Giant Interactive (NYSE:GA) also called attention to the low forward price-to-earnings multiple that NetEase commands relative to peers such as Shanda and The9. Many CAPS investors agree that even with the risks in China -- particularly the government's regulation of gaming -- owning a more value-priced leader like NetEase makes sense. Indeed, more than 97% of CAPS players rating NetEase believe it will beat the S&P going forward.

Coke is it
Mechel and other raw-materials peers continue to ride the wave of demand that developing nations such as China and India are driving. But what has put Mechel's stock over the top recently is its winning bid for coal miners Yakutugol and Elgaugol. The announcement of increased production of steel, nickel, and coal for the first nine months of the year continued to stoke the fire under Mechel's shares as well. CAPS investors have long been big fans of Mechel, with a unanimous 237 CAPS All-Stars betting the company will outpace the market going forward.

What's your story?
Ultimately, the only story that counts is your own. Whether you buy the story of a soaring or a souring stock, your own research is more important than collective opinions. But these collective opinions make an individual's due diligence much easier.

So step right up and chime in with your own take on these or any of the more than 5,200 stocks that investors have covered in Motley Fool CAPS. It's totally free to be a part of the service, and the payback is more than worth it.