Today I present you with a hand full of stocks that just keep going and going. You can ride the momentum, but set your stop losses because when stocks get heavily accumulated in a short period of time, valuation gets crushed, and a huge correction can bite you. I call this the momentum screen. The criteria is:
1. Must be close to 52-week high, the ultimate resistance
2. Must have no significant pullbacks or corrections in the past two months
3. Must have Y-O-Y growth in revenue
4. Must have high volume
5. Trade over $5
If you want, you can check out Business Week Online’s momentum picks made back in January. They didn’t do such a good job, with the exception of AAR Corp…. notice the 6 month chart and trace these stocks from January. Anyway, as you can see, my screen is very simple! Just find what’s making money and what is being heavily accumulated, with nice looking technicals. I call it piggy-backing: company does well and stock goes up fast, cautious people wait for price to go more up then they give in and jump on, more cautious people give in too then they jump on. It’s the law of demand in a very ugly way.
Anyway here’s the my top 5:
1. GigaMedia Ltd. (GIGM)- Gigamedia is a little monster! They are Taiwan’s leading provider of broadband and internet content on the internet. They provide video games and now they are taking advantage of online poker. Those Koreans must love to gamble because that seems to be one of their fastest growing customer base. It wasn’t too long ago that Gig signed some partnerships with Yahoo, back when GIGM was trading at about $2. I caught on at $3, but have since kicked myself since I felt $9 was the magic number. By the way, revenue has been consistently doubling Y-O-Y.
2. Empire Resources Inc. (ERS)- why? why? Why didn’t I buy this?!! If you thought titanium was a hot metal, check out the performance on this aluminum producing company! Don’t believe me? Try 1000% in one year!!!
3. Amkor Technology (AMKR)- Bam! Just like that, up another 12%! This company has a lot of sales, so much that its amazing that it only trades at $12. With over $2 billion in revenue the stock trades at .93 of sales. The only thing about this company is that they have almost $2 billion in debt on the balance sheet. I think Wall Street seems to be ignoring that figure, but I guess you can’t fight ’em, just ride!
4. Illumni Inc. (ILMN)- Now this is a unique pick. Illumni is a biotech company, and as we all know biotechs have been one of the worst performing industries this year! But Illumni is an outlier! While the industry is down 10%, Ilumni has doubled since January. Just recently the stock broke free from 52-week high which happened to be its last strong resistance! It’ll be interesting to watch this stock when biotechs make a comeback.
5. Lehman Brothers (LEH)- I wanted to add this because of it made a 5-year high, that’s right I said “year.” But I’m not to sure if LEH is a momentum play because it looks more like a great company. A true leader in a strong strong sector… I guess there is momentum.
5. Hansen Natural (HANS)- Okay, so this is more like #6, but I’ll say it’s a tie since I couldn’t make up my mind. HANS is just in its own world. I always thought their stuff tasted nasty, but you can’t argue with this Canadian company. Coke? Pepsi? Bwa ha ha! No one thought this stock would hit triple digits. A slap in the face for every dollar above $100 for not believing HANS? That’ll be 45 slaps to you. Ouch!
Runner-ups (stocks that didn’t fit the criteria, but have stunning charts!!!):
- FJC– less than $5, but up 300% in less than a month! Why the rise? Heavy institutional buying!
- BDCO– the best performing oil/energy stock, but it had a major correction.
- AE– very light volume, but my o my, look at that chart! Beautiful!
- NXG– a play on gold. Northgate is very popular lately. Should break $5.
- RACK– a fortunate company that does Google’s servers. I didn’t want to add them to the list because Google brought them up, Google can take them down. But until then, enjoy the ride!
Stop trading these momentum stocks! These stocks seem to be consolidating, or a strong battle between the long and shorts have emerged, or the technicals are beginning to break down. Look out below! Timberrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr!!!!
1. TravelZoo (TZOO)
2. Zoltek (ZOLT)
3. Ballard Power (BLDP)
4. … this list can get pretty long, I’ll just stop here.
A link to all stock prices mentioned in this post. Shows 1-year performance.
