5 stocks with hot hands

By The Motley Fool

When the clock's ticking down and the game's on the line, which of your teammates do you trust to sink a winning shot?

Sure, you could dish the rock to your resident superstar -- but what if he's playing ice-cold at the moment? Instead, you pass to the guy with the hot hand, the one who'll be deemed en fuego, or on fire, tomorrow on ESPN.

Momentum investors are looking for stocks in a similar state of sizzle. But momentum by itself will only get you so far.

I prefer to find high-quality stocks that also have some positive inertia on their side. It's like kicking the ball out to your team's superstar when he does have a hot hand.

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To find these league-leading winners, I cross-referenced a simple momentum screen with data from the MSN CAPS investing community. The screen, executed June 24, was designed to produce stocks that were up 30% or more over the past year, trading within 5% of their 52-week highs and rated highly by CAPS participants.

At first glance, this sure looks like a high-quality group. But, as always, I recommend taking a close look before you throw a bounce pass in the direction of any of these stocks.

In a state of sizzle

Company	Sector	12-month change	52-week high	CAPS rating
Agrium	Agricultural chemicals	123%	$113.88	*****
Copart	Auto dealerships	33%	$49.34	*****
Partner Communications	Wireless communications	43%	$24.70	*****
XTO Energy	Natural gas	37%	$73.74	*****
Halliburton	Oil-field services	52%	$53.98	*****

In the movie "The Big Lebowski," the hero's car takes one beating after another -- from getting peppered with Uzi fire to being stolen to slamming into a Dumpster. Our hero ("the Dude") is dead broke, so he can't afford a new car, and he doesn't seem to have insurance on his trusty junker.

While the Dude had to put up with his shipwreck of a car, the rest of us insurance-carrying drivers would have eventually been told by our insurance company that it was time to let our poor wheels die in peace. That's where Copart (CPRT, news, msgs), a junk car auction service, comes in.

When an insurance company like Berkshire Hathaway's (BRK.A, news, msgs) Geico decides that the cost of repairing a car, setting up the driver with a rental and paying other associated costs exceeds the value of the pre-wreck car, minus what they can get for selling off the mangled mess, they cut the driver a check and dispose of the hunk of metal.

And in a growing number of cases, the insurance company knocks on Copart's door to take care of the wrecked car.

You might think of Copart as the eBay (EBAY, news, msgs) of the car-salvage world, hooking up motivated insurance sellers with buyers interested in trying to fix up the cars or simply dismantle them to sell as parts. And just like eBay, Copart's Virtual Bidding Second Generation Internet technology makes most of this happen over the Web.

Copart has been drawing investors lately, not only because it has demonstrated healthy growth, but also because it has shown it can prosper even as the rest of the business world is dealing with recession-like conditions.

On CAPS, the stock carries a maximum five-star rating and has a healthy 53-to-1 bull-to-bear ratio.

CAPS All-Star "JCSmiley" rated the stock an outperformer in April, noting an appreciation for the way the company is cornering its market.

"(Copart) is not a value stock, by any means. It's purely a growth stock," the All-Star wrote. "I think this company has a great niche market, and the CEO has found a way to blend junkyards and the Internet together. Nice combination! The number of cars on the planet will not reduce anytime soon, and people are always needing parts for those cars."

So do any of these companies deserve a place on your All-Star team? You can share your thoughts on Copart or check out what other investors had to say about this or any of the 5,500 other stocks CAPS participants have rated.

I think I heard a "boo-yah" somewhere out there -- thanks, Stuart Scott!

This article was reported and written by Matt Koppenheffer for The Motley Fool. At the time of publication, he owned none of the stocks mentioned.