Catch These 5 Fast-Moving Stocks

Catching a tailwind when flying can get you to your destination faster. So too with investing: Finding stocks that will earn you profits will be faster if you have the wind of investor sentiment at your back.

In the chart below, you'll find stocks that have gotten a big bump in investor confidence. These are formerly low-rated stocks that have since been awarded the highest ratings by our CAPS community of more than 115,000 members. Why is that important? Our data shows that stocks achieving five-star ratings on Motley Fool CAPS have outperformed the market by 12 percentage points, and newly minted five-star stocks represent your best opportunity to capture those returns.

The five companies listed here have jumped from just one or two stars three months ago to the highest four- and five-star ratings today. With such support at their backs, we'll see if they can withstand the winds of change.

Stock	CAPS Rating	Est. EPS Growth Next Year
Acorn International (NYSE: ATV)	****	767%
Allied Nevada Gold (AMEX: ANV)	****	NA
ARYx Therapeutics (Nasdaq: ARYX)	****	(7%)
City Holding (Nasdaq: CHCO)	*****	35%
GenCorp (NYSE: GY)	****	44%

But just because these stocks are purring doesn't mean you should jump into them blindly. Catching a tiger by the tail can end up leaving you scratched and bleeding. That's why we recommend you use this list as a launchpad for your own research and analysis.

Fleet of foot
Despite holding nearly $23 million in preferred shares of Fannie Mae and Freddie Mac, regional bank City Holding has stated that it would not be troubled if it ultimately had to take a 100% writedown on them. Unlike Wachovia (NYSE: WB), which could not withstand the onslaught of losses it incurred and was forced to sell itself to Citigroup (NYSE: C), City Holding maintains that it will be well-capitalized regardless of its Fannie and Freddie losses.

That's not the case with many other small, independent banks, which perhaps more resemble Wachovia than City. According to the Independent Community Bankers of America, some 4% of its 5,000 members will need to raise capital because of losses incurred in Fannie and Freddie preferred stock. It also expects at least a dozen banks to fail and for about 40 such banks to have to be sold to rivals.

There have been fewer CAPS pitches made for City Holding in the last few months, but that's not surprising considering the turmoil in the financial markets. Holding your breath and pinching your nose while trying to pick winning financial stocks typically isn't the way to build a profitable portfolio. Yet even six months ago, CAPS member donnsand1 noted the positives behind this regional bank, picking it to outperform the market:

this regional bank has made a [tremendous] comeback over the last few years. they have no exposure to sub-prime loans, a well run bank that after several years of throwing darts, shed the non-banking underperforming business. now they are concentrating on the business of being a bank.

The overall score leader for City Holding is top value investing manager David Dreman, who runs Dreman Value Management. Between December 2007 and March 2008, he increased his bank holdings by 16% and then boosted them another 82% by June. Seems he was noticing City Holding's value just as CAPS members have.

Copyright © 2008 Universal Press Syndicate.