Salesforce.com Is a Bottle Rocket

There's a school of thinking that sees more promise in superior gains than in digging up great starting prices, even if you seem to be overpaying for that bottle rocket. Richard Driehaus, the godfather of momentum investing, takes exception to buying low and selling high: "I believe that far more money is made buying high and selling at even higher prices." And our Rule Breakers analysts would agree with that: Momentum-like criteria show up twice in the six pillars of that newsletter's strategy.

Price momentum may not be a traditional marker of a strong business or a capable management team, but when you think about it, those qualities should eventually generate strong returns. This is just a slightly backwards way of looking at the numbers, throwing "cause" and "effect" into the same basket to find a starting point for more research.

So what kind of bottle rockets can we find today? I took that question to our CAPS screener, looking for stocks that have at least doubled from 52-week lows and are still within 10% of yearly highs.

One stock that caught my eye among the resulting 127 tickers today is salesforce.com (NYSE: CRM). If you bought shares of the customer relationship software specialist a year ago, you're sitting on a massive 113% gain today. It's been nothing but blue skies ahead since early 2009, and the stock looks set to explore new highs -- again and again.

Here's how salesforce.com's gains stack up against some direct rivals over the past year:

Source: Motley Fool CAPS. Data as of Aug. 28.

Past performance is no guarantee of future results, and you should always do more research after finding a promising stock by screening. In this case, salesforce.com is on a roll that none of its less laser-focused major competitors can match.

The company was into the software-as-a-service model of cloud computing long before either term was coined. What now is standard practice in the enterprise software world was revolutionary ten years ago, and salesforce.com knows the new modus operandi like nobody else -- because the company basically invented it and has been operating that way for a long time.

The stock looks dangerously pricey on a price-to-earnings basis, which keeps a lot of prospective investors away. Me, I call it smart tax accounting. The company created $285 million of free cash flow over the past 12 months, which is nearly four times the reported GAAP earnings. Its cash flow valuations are still high, but nowhere near as scary as the earnings-based ones.

Buy now or forever hold your peace: This bottle rocket still has plenty of dry powder left in its growth engines.