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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 in solar stocks bobbed up and down wildly as we approached and rang in the new year, among them ReneSola (SOL, news, msgs), a Chinese maker of solar wafers, which inexplicably shot up more than 33% in a day.
But beyond these less-predictable events are stocks with fundamentally compelling reasons for recent momentum. The trick is to find those stocks. That's where MSN CAPS, the community of investors helping each other beat the market, can help.
CAPS is no crowd of lemmings. Its better-performing members' 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 125,000 CAPS members to filter out the noise and find companies offering strong momentum.
As wisdom-of-the-crowd experiments show, collective estimates are often superior to the estimates of most individuals. The ratings and comments from CAPS members aren't always on the money, but there's value in a system that incorporates the knowledge, information and skills of thousands of participants.
We'll use CAPS' handy stock screening tool to quickly zero in on companies with a stock price increase of at least 35% in the past four weeks, a market cap of greater than $100 million, and a beta of less than 3. (Beta is a way of measuring risk in a portfolio; it describes how the expected return of a stock correlates to the return of the market as a whole.)
Below is a sample of stocks our screen returned. Run this screen yourself, if you'd like, but bear in mind that results regularly change with the stock market.
| Company | Sector | 1-month change | Beta | CAPS rating |
|---|---|---|---|---|
Online gaming | 50% | 2.9 | ***** | |
Aluminum | 35% | 2.0 | **** | |
Fertilizer | 56% | 1.9 | **** |
Shares of GigaMedia (GIGM, news, msgs), which develops and licenses online gaming software, hit a 52-week low of $2.64 on Nov. 11. Its 70% decline in 2008 was bigger than the losses sustained by rivals NetEase.com (NTES, news, msgs) and Shanda Interactive Entertainment (SNDA, news, msgs).
But the Taiwanese company remains profitable; it posted double-digit earnings gains in the third quarter. Many investors feel that, with no debt and more than $100 million in cash, the company is virtually being given away at its prevailing share price.
GigaMedia is not holding back in developing new business, either. The company recently announced plans to expand its online gambling empire into the sports betting world, partnering with Victor Chandler International Group, one of the world's oldest and best-known online gambling companies, to launch Everest Bets.
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Given GigaMedia's low valuation in the face of plentiful future growth potential, 98% of the 2,025 CAPS members rating it expect the company to outperform the market.
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The demand cycle that had been pushing commodity prices through the roof started to slip late in the year, sending shares plummeting.
Stock Chart (Year)
Potash of Saskatchewan
While potash prices have remained strong in recent months, thanks to decreased production, supply has been high for nitrogen and phosphate, leading companies like Terra Industries (TRA, news, msgs) and Mosaic to cut back on production.
While nitrogen and phosphate have had constrained margins, Potash expects gross margins for potash to triple compared to 2007.
Despite the volatility, many investors look for a better 2009 for fertilizer stocks. Nearly 96% of the 4,274 CAPS members rating Potash remain bullish on its prospects to beat 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 collective opinions can make your due diligence a whole lot easier.
Add your take on these or any of the 5,400 other stocks that our 125,000-plus members 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 none of the stocks mentioned.
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