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Momentum Stocks On The Move For August 27

Posted: Aug 27, 2008 15:32 PM by Glenn Curtis

Tickers in this Article: AMD, INTC, LMIA, MTRX, NVDA, SAPE, SR

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. Regardless of the type of company, there are few experiences more enjoyable than watching the stock price of a company you own continue to surge upward day after day, while all that is required of the investor is to sit back and hold the stock as it continues to appreciate in value. (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.

Advanced Micro Devices (NYSE:AMD)

41.53%

$3.60B

LMI Aerospace (Nasdaq:LMIA)

21.28%

$256M

Matrix Service (Nasdaq:MTRX)

20.62%

$635M

Sapient Corp (Nasdaq:SAPE)

38.41%

$1.08B

Standard Register Co. (NYSE:SR)

23.85%

$301M

Data as of market close August 25, 2008

Advanced Micro Devices
I haven't exactly been the biggest bull on chipmaker AMD. I want to believe it's just because I don't think now is a good time to be buying (as I pointed out in my stock analysis piece in July). In that piece I voiced concern over the CEO shift, and pointed out how Intel (Nasdaq:INTC) compares with the California-based company. Intel since then has followed the same trend as AMD but not nearly as steep, with over a 4% increase since August 1, 2008.

I stand by my statements, but that doesn't mean AMD will be perpetually relegated to the doghouse. In fact, there are a lot of smart people out there that know the technology well and that insist that AMD is the play to make.

Last Friday, in an article named "AMD gaining ground in graphics chips...", the Associated Press reported that Craig Berger (an analyst from Friedman, Billings, Ramsey) disseminated a research note about how the company is likely nibbling away at Nvidia Corp.'s (Nasdaq:NVDA) market share. Nividia is also up over 14% in the month of August.

Advanced Micro Systems also made headlines earlier this month with the release of what it termed, “the world's fastest graphics card, the ATI RadeonTM HD 4870 X2.” One might also argue at this point that the expectations for the company are minimal, so perhaps any positive surprise might give the shares a nice boost.

Presently, according to Yahoo Finance, the company is expected to have earnings per share of -$1.70 this year and further lose 80 cents a share in 2009. (For more read Great Expectations: Forecasting Sales Growth.)

Again, I'm no bull on the stock right now, and I'd rather wait to get a better glimpse of what the future may hold before thinking about bottom fishing.

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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