3 stocks with momentum

By The Motley Fool

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 world-renowned gum supplier Wm. Wrigley Jr. (WWY, news, msgs) surged more than 23% when candy maker Mars and Warren Buffett's Berkshire Hathaway (BRK.A, news, msgs) orchestrated a sweet, $23 billion offer for the company last month.

But beyond less-predictable events like mergers and acquisitions are stocks with fundamentally compelling reasons to rally. The trick is to find those stocks. That's where CAPS can help.

• MSN CAPS: The wisdom of the investing crowd

CAPS is no crowd of lemmings. Its best-performing investors' opinions do more to shape each company's ratings than the picks of their poorer-performing peers. Let's use the collective wisdom of more than 105,000 CAPS investors to filter out the noise and find companies offering strong upward momentum.

We'll use CAPS' stock screening tool to quickly zero in on companies with stock-price increases of at least 15% in the past four weeks, a market cap of at least $100 million and a beta of 3 or less. (Beta is a way of measuring risk in a portfolio. It describes how the expected return of a stock is correlated to the return of the market as a whole.)

This screen keeps us clear of the wild, pump-and-dump land of penny stocks. Here's a sample of stocks our CAPS screen returned:

Stocks on a roll

Company	Sector	1-month stock-price change	Beta	CAPS rating
Alpha Natural Resources	Coal	46%	1.5	***
LDK Solar	Solar wafers	23%	NA	****
WellCare Health Plans	Health care plans	24%	-0.24	****

With our list of screened stocks, it takes a single click to get context on what’s behind the recent momentum at individual companies -- each CAPS page includes basic details about the company as well as the stock's performance.

Good health, bad health

It's been down, it's been up. Then down again, and now up. Investors in WellCare Health Plans (WCG, news, msgs), a managed care provider, have seen it all in the past year. As the company recovers from its implosion last October -- when state and federal agents raided the company -- investors have been whipsawed by news from both inside the company and in the wider industry. While the larger health-care industry remains under pressure to reduce costs, WellCare has been cleaning house in upper management to realign the business.

In the past month, however, shares of WellCare have been rising because investors see the company as a potential takeover target. Even late financial results and a $32 million charge related to the ongoing investigation haven't derailed the momentum -– shares are up about 25% over the past month.

One factor in the run-up is the company's May 22 announcement that it would pare 5% of its work force to better compete in the market for government-sponsored health-care programs.

Even with all the gloom and doom surrounding WellCare and the health-management sector as a whole, many value investors see the health-care sector as recession-proof. They also have a strong lead to follow: WellCare has caught the eye of renowned value investor Mohnish Pabrai, whose hedge fund invested in shares in the first quarter of 2008.

• MSN Stock Challenge: Win cash and other prizes

The CAPS community largely agrees that the risk is worth it, with more than 94% of CAPS investors bullish on WellCare’s prospects to beat the Standard & Poor's 500 Index ($INX).

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 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 CAPS. It's totally free to be a part of the community, and the payback can be valuable.

This article was reported and written by Dave Mock for The Motley Fool. At the time of publication, he owned shares of Wrigley.

Editor's note: MSN CAPS is an investor intelligence service hosted by The Motley Fool. Companies are rated by players to outperform or underperform the market and are subsequently ranked from one star (the lowest) to five stars. Between Jan. 3, 2007, and May 12, 2008, five-star companies outperformed the SPDR Trust, an exchange-traded fund that tracks the S&P 500, by an average of 9 points, annualized, while one-star companies underperformed by an average of 15.6 points, annualized.