More Than Momentum: Stocks Rising for a Reason

Even on the market's worst days, buyout news and other short-term forces can send individual stocks up by 10%, 25%, even 50%.

For example, CIT Group's (NYSE:CIT) shares bounced back nearly 30% last Tuesday after the company announced it will get rid of its suffering home-lending business and manufactured-home portfolio for $1.8 billion.

But beyond less predictable events like that one are stocks with fundamentally compelling reasons for recent momentum. The trick is to find those stocks. 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 110,000 CAPS investors to filter out the noise and find companies offering strong momentum.

We'll use CAPS' handy stock screening tool to quickly zero in on companies with a stock price increase of at least 25% in the past four weeks, 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 CAPS screen returned:

Return data is calculated as the difference between the closing price on June 9 and the closing price on July 7, per Yahoo! Finance. Star ratings from CAPS.

With our list of screened stocks pulled up in CAPS, it takes only a single click on individual companies to get some context behind the recent momentum.

Sequenom
Shares in Sequenom got a boost recently after the company released data from its prenatal Down syndrome test that proved to be far more effective than current tests in the 201 test cases. With new optimism about the potential returns of prenatal diagnostics, Sequenom decided the time was right to raise some more capital by selling 5.5 million shares. The $92 million that Sequenom expects from the offering will help it compete for diagnostic dollars against profitable competitors such as Affymetrix (NASDAQ:AFFX) and Illumina. Not all investors are sold on Sequenom's prospects, though -- only 86% of the 216 investors rating the company in CAPS expect it to outperform the market.

Crystallex
Shares of Crystallex came under attack earlier in the year when it appeared that Venezuela would deny the company a permit to operate its Las Cristinas gold mine, which holds an estimated 17 million ounces of gold. But recent meetings with the ministry of the environment have given Crystallex -- and investors -- optimism that the project will be approved. Not all CAPS investors share the enthusiasm: A significant number see notable risk in the stock, with 44 of the 422 investors rating the company giving it the thumbs-down.

Asta Funding
While it has been a star performer over the past decade, it has become much harder for debt collector Asta Funding to get consumers to cover their financial commitments lately. But though slow collections have led to quarterly losses, the stock was pushed up following an investors day conference last month and news that it was expanding its board oversight to strengthen its portfolio. With many financial institutions anxious to offload consumer debt, many investors see an opportunity, as nearly 94% of the 327 investors rating Asta Funding in CAPS expect the company to outperform the market.

GMX Resources and Goodrich Petroleum
Thanks to heavyweight Chesapeake Energy putting the spotlight on lucrative gas reserves held at the Haynesville Shale, Goodrich Petroleum and GMX Resources' interest in the area has sent their stocks up. Goodrich continues to acquire more acreage in the Haynesville Shale and recently boosted its production outlook for the second quarter. GMX Resources is dramatically increasing its capital budget to accommodate the new drilling activity. Not all investors believe the underlying prospects will make winning investments out of both companies: Only about 81% of the 216 CAPS investors rating Goodrich expect it to outperform the market, while slightly more than 91% expect GMX Resources to outperform.

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

Add your take on these or any of the 5,500 stocks that our 110,000-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.