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Momentum Stocks On The Move For August 21

Posted: Aug 21, 2008 10:02 AM by Glenn Curtis

Tickers in this Article: PALM, LDK, IT, BAGL, CVC

While every individual investor in the market has complete control over his or her own investment decisions, there remains one market element that is almost always out of their control - momentum.

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Market momentum can often make or break an investor's stock pick. You can choose to buy stock in a company with a truly outstanding business model with seemingly limitless potential, but if the market sours on the stock, it may take months, or even years, before the stock gets some positive momentum under its belt and begins to produce decent price appreciation. At the same time, even a business of suspect quality can produce outstanding returns for investors who are able to get in on the stock early enough during a run of upward momentum that happens to occur. (For an overview of momentum investing principals, read Riding The Momentum Investing Wave.)

Strength of Momentum and Earnings Growth Are Critical
There are plenty of different ways that market momentum can be created for a particular stock, but individual investors should be primarily concerned with how strong a stock's momentum is, and how likely that momentum is to continue in the future.

In order to gauge these factors, investors can simply take a look at the amount of recent price appreciation and the rate at which the company's earnings are expected to grow in the future. This is based on the intuitive logic that the stronger a stock's recent momentum has been, the more likely it is to continue, while the greater its expected earnings growth rate is, the less likely the stock is to come crashing down, should its momentum falter.

With that in mind, here are five stocks that have risen by more than 20% over the past four weeks, and are expected to increase their earnings per share (EPS) by at least 10% year-over-year in their current full fiscal year:

Company Four-Week
Price Increase Market Cap.

Cablevision Systems
(NYSE:CVC) 43% $9.2B

Einstein Noah
(Nasdaq:BAGL)
21.12% $213M

Gartner
(NYSE:IT) 22.44% $2.6B

LDK Solar
(NYSE:LDK) 26.25% $4.7B

Palm Inc.
(Nasdaq:PALM) 46.34%
$846M

Data as of market close August 19, 2008

Build a Better Bagel
There is a lot of competition in the fast food space these days, but bagel chain Einstein Bagel seems to be faring just fine, thank you very much. The Colorado-based company is coming off a strong second quarter.

In the period ended July 1, the company earned $6.9 million which is earnings per share of 42 cents. That's a country mile ahead of the loss of $250,000, or 2 cents per share, it reported in the comparable period last year. It was also north of the 27 cents per share the Street had been looking for.

According to Yahoo Finance the chain is expected to earn $1.41 per share in 2008 and $1.37 per share in 2009. Now that's not exactly a terrific expected growth rate. However, for a stock that trades at about $13, with a trailing and forward P/E ratio around 9.5, those numbers are still appealing.

The Downside
Again, this is a competitive business. In addition I am a bit concerned that, despite Einstein Bagel's solid quarter and the street's outlook, there hasn't been a lot of insider buying. Due to this I think that the company is worthy of some follow up research. (For more read When Insiders Buy, Should Investors Join Them?)

When do you think these stocks will slow their upward run? Join the FREE Stock Picking Community to share your thoughts and see what other investors are saying.

By Glenn Curtis

Glenn Curtis started his career in the 1990s as an equity analyst for a regional firm in New Jersey. There, he covered companies in the technology, entertainment, and gaming industries. Curtis has since worked as a financial writer at a series of both web and print publications, including TheStreet.com and Registered Rep Magazine. He has held his series 6,7,24, and 63 securities licenses.

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