MIPS 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 gained 80% from 52-week lows and are still within 10% of yearly highs.

One stock that caught my eye among the resulting 132 tickers today is MIPS Technologies (Nasdaq: MIPS). If you bought shares a year ago, you're sitting on a massive 87% gain today. It's been nothing but blue skies ahead since hitting rock bottom during the market panic of 2008 and the stock looks set to explore new highs -- again and again.

Here's how MIPS' gains stack up against some direct rivals over the last year:

Source: Motley Fool CAPS.

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, MIPS has largely watched from the sidelines as the ARM architecture ran away with the mobile computing space -- but the times, they might be a-changin'.

The MIPS chip architecture can already be found in plenty of moderately sexy products, ranging from TV sets and set-top boxes to GPS units and digital cameras. Both ARM and MIPS will tell you six ways from Sunday that their processors are the most power-efficient and most suited for mobile computing; the changeover from 3G to 4G wireless networking technologies may give MIPS a chance to prove itself and grab a share of that rambunctious market.

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