5 stocks that are on fire

Momentum is good, but you'll limit your portfolio's potential if that's all you consider. The MSN CAPS community helps investors identify quality companies with positive inertia.

By The Motley Fool
When the clock's ticking down and the game's on the line, which of your teammates do you trust to sink a winning shot?

Sure, you could dish the rock to your resident superstar -- but what if he's playing ice-cold at the moment? So instead, you dish to the guy with the hot hand, the guy who will be deemed en fuego (on fire) tomorrow on ESPN.

Momentum investors are looking for stocks in a similar state of sizzle. But momentum by itself will get you only so far. I prefer to find high-quality stocks that also have some positive inertia on their side. It's like kicking the ball out to your team's superstars when they do have a hot hand.

• Contest: Beat the market, win $2,500

To find these high-quality winners, I cross-referenced a simple momentum screen with data from the MSN Money CAPS investing community.

Each company is up 30% or more over the past year, is within 5% of its 52-week high and has been rated highly by CAPS players.

At first glance this sure looks like a high-quality group. But, as always, I highly advise taking a close look before you throw a bounce pass in the direction of any of these stocks.

Two of the hottest stocks of 2007 -- Apple (AAPL, news, msgs) and video-game retailer GameStop (GME, news, msgs) -- hit all-time highs in December on expectations that the holiday season would be good to both.

Apple kicked butt and took names all last year, and the Amazon.com (AMZN, news, msgs) electronics best-sellers list is currently littered with Apple products. And that list doesn't even include Apple's iPhone. Rumors are rampant that at the Macworld Conference in mid-January, Apple will announce monster sales of the iPhone.

CAPS investor "collegeeducated" recently said of Apple, "In my opinion, it is the best stock to own for 2008 out of any stock."

CAPS All-Star "davidengio07" rated the stock an outperformer in April and had plenty of good things to say about the company:

"Apple has carved out a strong market niche in this decade. (It) has excellent brands and customer loyalty and has a good business plan and strong management. . . . Apple will continue to be an innovator and a winner over the next year or so (and probably longer), beating the Standard & Poor's 500 index ($INX) significantly.

• Top Stocks blog: The latest on what's moving the market

So does Apple deserve a place on your all-star team? You can share your thoughts or check out more of what your other CAPS investors have to say about this any of the other stocks mentioned here. While you're there, you can also take a peek at some of the 5,000 other stocks users have rated on CAPS.

This article was reported and written by Matt Koppenheffer for The Motley Fool. At the time of publication, he owned none of the stocks mentioned.

Finding Hot Stocks Made Easy

By Mark Crisp

A stock that spikes can come crashing down just as quickly. Usually, fast spikes in the stock’s price points to the stock being volatile; not profitable. A hot stock could instead be a stock that would realize its full profits over time.

When it comes to finding hot stocks, the best thing you can do for yourself is to educate yourself. You shouldn’t be taking other people’s uneducated advice on hot stock picks. Learn everything you can about picking stocks, the market’s indicators, and just about anything you can get your hands on. In other words, take responsibility for learning how to pick your own stocks, without relying on other people’s uneducated advice.

Aside from educating yourself, a great way to learn how to pick hot stocks is to have a mentor. A mentor can show you what you’re doing right and wrong, and most importantly, why? Becaue a mentor has been there and done it. Choose very carefully who you lsiten to though. the Net. is full of people peddling information who have never walked the walk.

In addition to finding a mentor, look for qualified advice and educational material wherever you can. The internet is a great place to find qualified advice.

Investment advice blogs have soared as a means for expert stock traders to spread their advice. Finding several information-rich blogs and following them can be a very powerful educational tool for the beginning investor.

Another great source is online forums. Here you can communicate with and ask advice from already successful traders.

Get your Momentum Stock Trading System and sign up for my free weekly online trading system newsletter here at: http://www.stressfreetrading.com