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 of NRG Energy propelled ahead 29% when an unsolicited $6.2 billion offer for the company appeared from nuclear power giant Exelon.

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 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 120,000 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 15% in the past 13 weeks, a market cap of greater than $100 million, and a beta of less than 3.

Here's a sample of stocks our CAPS screen returned:

Source: Motley Fool CAPS. Price return from July 25 through Oct. 24.

Indevus Pharmaceuticals
Investors gave drugmaker Indevus Pharmaceuticals a severe spanking in June when the FDA determined that its testosterone drug Nebido would require more testing, setting back the release of the drug in the U.S. by potentially two years. But the FDA later changed its tune, and the agency now says it will allow Indevus to submit Nebido for approval without additional trials, which could bring the drug to market by the end of next year.

Indevus also recently signed a licensing deal with Teva Pharmaceuticals (NASDAQ:TEVA) to help with development of stuttering treatment Pagoclone, which could bring in a milestone and reimbursement payment of up to $92.5 million. With the better outlook from the FDA on Nebido and another revenue source in the Teva deal, investors warmed up to Indevus again and doubled the stock overnight.

Unlike many budding drugmakers that rely on only one blockbuster drug, Indevus has several drugs that provide revenue. It recently received patent protection for its bladder treatment drug, Sanctura, which some CAPS members believe could develop into a very significant revenue source to reward investors, especially considering the aging population.

It’s also entering phase 3 studies for its octreotide implant drug, which Indevus CEO expects will fit well into a $1.2 billion global market. With potential to launch in early 2011, the drug would go head to head with Novartis’ (NYSE:NVS) Sandostatin. With opportunity from a diverse base of drugs on the market and in development, more than 96% of the CAPS members rating Indevus expect it to outperform the market.

PetMed Express
Just as human pharmacies like CVS Caremark (NYSE:CVS) and Walgreen (NYSE:WAG) have recession-resistant qualities, PetMed Express has been showing nothing but upside through all the recent market turmoil. CEO Menderes Akdag says that the current economic downturn has had no impact so far on the company and that the animal-medication seller added about 239,000 new customers in its fiscal second quarter. Revenue rose 16% to $59.6 million, and the company expects to continue capital spending for expansion in the third quarter.

The company continues to surpass analyst expectations for profits, as well, and has earned a 27% EPS growth rate over the past three years. The impressive financials at PetMed Express have been winning over more investors, too, and the recently upgraded stock is getting more attention for the part it plays in tapping the growing multibillion-dollar animal health-care industry.

The company is also No. 5 on Forbes’ list of top 200 small companies, with many of last year’s picks, like Hansen Natural (NASDAQ:HANS), already outgrowing this year’s list criteria. PetMed could go that way, too -- more than 97% of the 560 CAPS members rating PetMed Express see it continuing to beat the market going forward.

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 5,400 stocks that our 120,000-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.