More Than Momentum: Stocks Rising for a Reason

Even on the market's worst days, buyout news or other short-term forces can send individual stocks up by 10%, 25%, even 50%. For example, when Microsoft (Nasdaq: MSFT) proffered a $44.6 billion unsolicited bid for Yahoo! (Nasdaq: YHOO), stock in the online property jumped more than 48% in a single day.

But beyond one-time blips like this are stocks with compelling reasons for recent momentum -- provided you can find them. That's where Motley Fool CAPS comes in.

The story behind the story
CAPS is no crowd of lemmings; its best-performing investors' 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 83,000 CAPS investors to filter out the noise and find companies showing strong momentum.

We'll screen for companies with a stock price increase of at least 30% in the past month, a market cap of greater than $100 million, and a beta of less than 3. That'll keep us clear of the wild, pump-and-dump land of penny stocks.

Here's a sample of stocks our screen returned.

Let's burrow through this list of stocks that have thumped the market over the past month, and find out why they've performed so well.

What's under you?
Here at The Motley Fool, we eschew attempts to time the market, or any individual stock for that matter. The reasoning is simple -- it's extremely difficult to consistently tell the future, much less to use that prescience to your advantage. Sports apparel maker Under Armour's 54% rise in the past month is a great example; to realize this gain, investors would have had to buy on precisely the right day. Had they bought the day before, their returns would drop substantially, to 17%.

Shares in Under Armour were whipsawed in mid-January, after the firm guided higher expenses that would cut into profits in the first half of 2008. The expenses included high costs associated with marketing its new performance footwear line, topped off with a pricey advertisement during the Super Bowl. The combination of higher spending on a new product and increased inventory in a softening retail market also led to an analyst downgrade.

But the stock promptly recovered, thanks to some investors' belief that even though profits would amount to only $0.03 to $0.05 per share in the first half, the back half of the year would make up for it. With competing opinions circulating regarding the stock's value in light of its heavy spending, most analysts agree on one thing: The footwear line could dramatically boost revenue. For this reason, Under Armour is one volatile stock, and that situation probably won't change anytime soon. CAPS investors remain somewhat divided on Under Armour. While a sizable group of 1,226 investors are bullish on the company, 143 have voted for shares to underperform the market in the future.

Retail momentum
Two other retailers make our momentum list this week: Chico's and Coldwater Creek. Both stocks have made a sizable bounce off yearly lows punctuated by increasingly pessimistic outlooks for same-store sales in the final months of 2007 (thanks to a depressed retail market). But at least one analyst opined that although year-end holiday sales were poor, outlook for sales of women's apparel in January looked much healthier.

Companies in the retail sector as a whole have been further buoyed lately, as many take drastic steps to operate more efficiently in the coming year. Doing his part, Coldwater Creek chairman Dennis Pence showed some gusto by snapping up more than 1.7 million shares late in January. Not all CAPS investors would follow his lead, though -- 54 of the 478 investors rating Coldwater Creek feel that shares will underperform the market in the future.

What's your story? Whether you buy the tale of a soaring or a souring stock, your own research is more important than collective opinions. But CAPS' insights do make individual due diligence a whole lot easier.

Add your take on these or any of the 5,400 stocks that our 83,000-plus investors 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.