3 Stocks Bucking the Downtrend

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, shares in Advanced Medical Optics jumped nearly 143% when it was announced that Abbott Labs (NYSE:ABT) would pay a huge premium to buy the company.

But beyond less-predictable events like that one are stocks with fundamentally compelling reasons for recent momentum. The trick lies in finding those stocks. That's where Motley Fool CAPS comes in.

The story behind the story
CAPS is no crowd of lemmings. Its best-performing members' 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 125,000 CAPS members 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 20% in the past four weeks, a market cap of greater than $100 million, and a beta of less than 3.

Below is a sample of stocks our screen returned. If you'd like, run this screen yourself; just keep in mind that results will be updated as the market changes.

Source: Motley Fool CAPS. Price return from Dec. 19 through Jan. 16.

Over the hedge
Plunging oil and gas prices over the last several months have dealt a serious blow to energy stocks like Linn Energy and Penn West Energy (NYSE:PWE). But Linn Energy has actually been pretty deft at navigating the downside of this cycle. It successfully hedged its output to lock in top prices for 99% of its current production, as well as the bulk of its output for the next several years.

The company also took advantage of peak oil and gas prices in 2008 by selling off several properties for about $1 billion, including one to XTO Energy (NYSE:XTO) for $600 million. Those property sales gave the company roughly $500 million in borrowing capacity; combined with Linn's conservative approach to acquiring mature wells, that reserve of capital gives many investors confidence that Linn's healthy cash distributions will be stable for the next several years. In CAPS, 96% of the 446 members rating the company expect it to outperform the market.

The doctor is in
Orphan drug specialist BioMarin Pharmaceutical's shares have risen after its recent announcement that it licensed phase 3 lupus treatment drug Riquent from La Jolla Pharmaceutical. BioMarin agreed to a small up-front payment, and it will only dole out more payments on the back end if the drug works, giving the company a low-risk entry into a potentially lucrative drug.

Riquent is designed to prevent kidney flare-ups in lupus patients, which could potentially create a large market for the drug if it is approved. But even though there hasn't been a new drug developed specifically for lupus in more than four decades, several companies like Genentech (NYSE:DNA) or Bristol-Myers Squibb (NYSE:BMY) are now testing treatments for lupus patients, which could increase Riquent's competition.

BioMarin also recently scored a milestone payment of $30 million, after its partner Merck Serono received marketing approval for the drug Kuvan from the European Commision. BioMarin will receive royalties on net sales of the drug in the EU, which could result in large payments if European sales approach the levels that BioMarin has predicted for the U.S. Drawn by the potential of these drugs, 95% of the 896 CAPS members rating BioMarin expect it to beat the market.

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 CAPS' viewpoints. But our community's collective opinions can make your due diligence a whole lot easier.

Add your take on these or any of the nearly 5,400 stocks that our 125,000-plus members 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.