3 Stocks Breaking Out

Volatile markets seem to be the norm these days, as stocks gyrate through ups and downs on a daily basis. But sometimes buyout news and other short-term forces can send individual stocks soaring by 10%, 25%, even 50% -- even on the market's worst days.

For example, shares of USEC jumped 24% last Tuesday after it was announced that Toshiba and Babcock & Wilcox would make a three-phase, $200 million investment in the company.

But beyond less-predictable events like that one are stocks with fundamentally compelling reasons behind a big move. 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. Here's an example of how we can use the collective wisdom of more than 165,000 CAPS members to filter out the noise and find companies with strong potential.

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 four weeks, a market cap of greater than $100 million, and a beta of less than 3. Then we can use the insight of the CAPS investment community to add some context to these market movers.

Source: Motley Fool CAPS. Price return from April 30 through May 28.

Five Star Quality Care
Despite a significant decline in first-quarter earnings, senior living and health care company Five Star Quality Care's bottom line was enough to beat analysts' estimates and a proved to be a much better showing than troubled peer Sunrise Senior Living's (NYSE: SRZ) $16 million first-quarter loss. And with a 2.8% increase in the average daily rate, the company was able to increase revenue even though occupancy rates were off slightly. While CAPS members have Sunrise pegged at a bearish two-star rating, Five Star Quality Care sits at a top five-star CAPS rating, with 96% of the 147 members rating Five Star Quality Care expecting it to be a market-beating investment.

Pacer International
Earlier this year, transportation and logistics services provider Pacer International pleasantly surprised investors with a 2009 fourth-quarter profit with help from a multiyear agreement with Union Pacific (NYSE: UNP), and its most recent expectations-topping earnings report has kept the momentum going. The stock's CAPS rating has fallen a notch after its recent gains, but some CAPS members still think the company is well positioned for growth and like the potential for more business as the economy shows signs of improvement. Pacer saw growth in its retail intermodal volume in the first quarter, despite the tough operating environment, and trucking companies Con-way (NYSE: CNW) and its troubled peer YRC Worldwide (Nasdaq: YRCW) have also recently seen improvements in business. Overall, 91% of the 301 CAPS members rating Pacer International expect it to beat the S&P.

Sprint Nextel
With the launch of Sprint's new Evo 4G phone nearing, several Wall Street analysts and investors have taken a more bullish stance toward the company, anticipating that the phone and an expected wider rollout of its 4G service could help reinflate its dwindling postpaid subscriber base. Some CAPS members have also added bullish commentary on the stock recently, betting that the speed and first-mover advantage of its 4G network will help drive more business. But the improved outlook hasn't been enough to translate into a higher rating, which remains stuck at two stars, with only about 80% of the 2,027 CAPS members currently rating Sprint Nextel believing it will outperform the broader 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 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 165,000-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.