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, stock in CNET Networks (NASDAQ:CNET) surged almost 44% when mainstream media giant CBS (NYSE:CBS) offered to take out the online media property 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 do. Let's use the collective wisdom of more than 105,000 CAPS investors to filter out the noise and find companies offering strong momentum.

We'll screen for companies with a stock price increase of at least 30% in the past month, 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 screen returned:

Return data is calculated as the difference between the closing price on April 18 and the closing price on May 20, as per MSN Money's screen. Star rankings from CAPS.

Let's burrow through this list of stocks that have thumped the market in the past month and find the story behind the numbers.

Converting energy into money
With many companies reporting strong earnings in the most recent quarter, there's plenty of stocks surging higher on solid results in the face of a gloomy economic outlook. But few of them are blowing the roof off with greater than a 73% gain over the past month, as Energy Conversion Devices has managed to do. A mainstay in the alternative-energy space, Energy Conversion finally put an end to three years of operating losses in the business when it reported a surprisingly strong fiscal third quarter two weeks ago.

While analysts and investors braced for more losses, Energy Conversion came through with $7 million in net income thanks to revenue that soared 24% sequentially to $70 million. Overhauling the business to focus more on profitably commercializing its technology is apparently starting to pay off. New CEO Mike Morelli credited the financial spoils to sustainable changes in the business and forecasted even higher revenue for the company's fiscal fourth quarter, driven by demand for solar products.

One would think that a blowout quarter would propel a company to greatness in the eyes of investors, but Energy Conversion has lost favor in CAPS since its quarterly report.  The company's rating has been knocked down from four stars to three following the report, an indication that more investors are finding reason to be bearish about ECD today than before.

For a company that has a long history of unrealized potential, it's not unreasonable for investors to wait for a little follow-through before budging from a bearish stance -- one profitable quarter may be a blip rather than a trend. And more than a few CAPS All-Stars think the surge in the stock was overdone. Still, more than 90% of CAPS investors are bullish on Energy Conversion and believe it will beat the S&P going forward.

Go wild
Restaurateur and Motley Fool Hidden Gems recommendation Buffalo Wild Wings hasn't been getting much respect -- until lately. As the stock crumbled to the tune of 45% in the second half of 2007 while the market frantically rubbed its macroeconomic worry stone, Buffalo Wild Wings simply followed its recipe for growth both in existing stores and new development. Management must have been smiling on the most recent conference call, when the company reported a more-than-respectable 4.1% climb in same store sales at its owned restaurants.

Buffalo Wild's management wasn't the only one's relishing the "I told you so" moment -- plenty of Fools and CAPS investors have long been bullish on the company. And even after a rapid 37% gain in the stock, nearly 95% of the 4,415 investors rating the company believe it will outperform the broader market.

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 5,600 stocks that our 105,000-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.