When the clock's ticking down and the game's on the line, which of your teammates do you trust to sink a winning shot? Sure, you could dish the rock to your resident superstar -- but what if he's playing ice-cold at the moment? So instead, you pass to the guy with the hot hand, the one who'll be deemed en fuego tomorrow on ESPN.
Momentum investors are looking for stocks in a similar state of sizzle. But momentum by itself will get you only so far. I prefer to find high-quality stocks that also have some positive inertia on their side. It's like moving the ball out to your team's superstars when they do have a hot hand.
To find these league-leading winners, I cross-referenced a simple momentum screen with data from the Motley Fool CAPS investing community. Each of the companies below is up 30% or more over the past year, now trades within 5% of its 52-week high, and has a high rating among CAPS players.
|
Stock |
12-Month Change |
Percent Below 52-Week High |
CAPS Rating (out of 5) |
|---|---|---|---|
|
K-Tron International |
62% |
3.3% |
***** |
|
EnCana |
60% |
4.2% |
***** |
|
Permian
Basin
Royalty Trust |
60% |
3.3% |
**** |
|
BP Prudhoe Bay Royalty Trust |
54% |
1.6% |
***** |
|
American Ecology |
34% |
3.8% |
**** |
At first glance, this sure looks like a high-quality group. But, as always, I highly advise taking a close look before you throw a bounce pass in the direction of any of these stocks.
A tough crowd
It's slim pickings these days when it comes to stocks with the wind at their backs. Two out of the past nine trading days have finished with the S&P 500 up, and the past three in a row have all been in the red. Bad news flows like water, and if you ask some people, dollar bills will soon be worth more for the energy they produce when you burn them than for their value in our fiat system.
It may not be surprising, then, that this week's group of winners includes two oil trusts, an independent oil and gas producer, and a waste-management company. The fifth company on the list caught my eye, though. Among all this angst, what is an industrial capital equipment company doing up 62% for the year and right near its 52-week high?
Well, the processing and size-reduction equipment that K-Tron sells in 62 countries globally has been selling briskly as global growth continues despite the U.S. slowdown. In the fourth quarter, the results of which K-Tron announced last week, revenue rose 33% year over year and profit climbed 40%. For the full year, revenue and net income gained 36% and 66%, respectively.
The company's CEO gave credit to overseas business for the strong growth and noted that fourth-quarter bookings ended at $71 million -- an all-time high. It's no wonder he said that "by almost any measure, 2007 was an extraordinary year for K-Tron."
The stock also has a strong following in The Motley Fool's CAPS community. It has a perfect five-star rating, with 232 players rating it an outperformer versus just five who think otherwise. CAPS All-Star BiGjEnKs kept it short and sweet last October when telling why he thought the stock will outperform: "Phenomenal management in a profitable niche business."
So do you think K-Tron deserves a place on your All-Star team? You can share your thoughts on it, or check out more of what your fellow Fools had to say about this or any other stock on our list, by stopping in at CAPS. And while you're there, you can also take a peek at few more of the 5,400-plus other stocks that have ratings.
I think I heard a "booyah" somewhere out there -- thanks, Stuart Scott!
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