Money Matters - Simplified

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 Sybase rocketed 35% after it was announced that SAP would buy the company for $5.8 billion in an all-cash deal aimed to elevate SAP in the mobile space.

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.

Company

CAPS Rating
(out of 5)

4-Week
Price Change

Acme Packet (Nasdaq: APKT)

***

25.2%

iRobot (Nasdaq: IRBT)

***

24.6%

Thoratec (Nasdaq: THOR)

**

19.3%

Source: Motley Fool CAPS. Price return from April 23 through May 21.

Acme Packet
Acme Packet's shares have managed to not only recover from the recession but rocket past its 2006 IPO price, and a stellar earnings report issued recently has helped it continue its ascent. The company nearly doubled its product revenue and has seen strength in all areas of its business. In addition, it has broadened its focus on emerging product categories that it believes will turn into a multibillion-dollar market, more than three times the market size it had previously scoped. Its top customer, Verizon Wireless, a joint venture between Verizon (NYSE: VZ) and Vodafone (NYSE: VOD), is using its technology across a number of projects and Acme sees that trend continuing across its carrier customer base. 

Some CAPS members are hesitant in the face of a premium share price on Acme, but many remain drawn to its fast-growing markets. Overall, 90% of the 261 CAPS members rating Acme Packet see it outperforming the broader market.

iRobot
The robotic-vacuum business has been good to iRobot lately, which reported a near-doubling of first-quarter international home robot revenue. Its government and industrial robot revenue wasn't so shabby either, up 76%, giving it a much better showing than the first-quarter revenue declines at competitor General Dynamics (NYSE: GD)

Many CAPS members see even more potential for both Roombas and military sales. And with an alliance with Boeing (NYSE: BA) to develop a small unmanned ground vehicle (SUGV) and a strong backlog in its government division, some investors have high expectations for the stock, too. In CAPS, 88% of the 1,094 members rating iRobot see it as a market-beating investment.  

Thoratec
The launch of Thoratec's HeartMate II devices for destination therapy patients has expanded its market and helped generate a stronger first quarter than larger and more diversified companies such as Abbott Labs, which can't seem to get a break despite solid earnings recently. Revenue rose 36% and the increased commercial adoption of the HeartMate II has it calling for 30%-34% revenue growth this fiscal year over 2009. 

Despite the growth potential, a few CAPS members have concerns about the premium-priced shares. Comparing bulls to bears in CAPS, 81% of the 152 members rating Thoratec are on the bull side.             

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.

© 2010 UCLICK L.L.C.