ByJACK HOUGH
The U.S. stock market rally> has looked less ferocious lately. From its March low of 667, the S&P 500 index had exploded back to 1,000 by mid-August, a gain of 50% in less than half a year. By mid-November, the index had hit 1,100 an additional gain of 10%. Three weeks later, we re still at 1,100.
Of course, some stocks are still jumping. I recently screened for stocks that have produced double-digit price gains over the past week, compared with a median of 2% for S&P 500 companies. In general, such price momentum is a promising sign. Stocks that are rising quickly are more likely to continue outperforming over the next year, according to long-term studies. But much depends on the backdrop. Momentum stocks tend to fizzle fast when the market tumbles. So favor the companies below if you believe the market rally is only getting started, but be cautious about them if you expect another major plunge in the market.
G-III Apparel Group
One-week gain: 26%
Manhattan-based G-III Apparel Group holds licenses to make clothing under brands like Calvin Klein, Kenneth Cole and National Football League. Its shares plunged from $20 in September 2008 to $3 and change last February. They re back up to $20, perhaps justifiably so. Sales for the company are growing at a double-digit pace and profits are healthy. Shares are priced at 15 times earnings, a discount of nearly a third to the broad market. Debt is manageable and falling. Analysts say the company is one of a few clothing makers than looks likely to boost its sales using its existing stable of brands, not newly purchased ones.
Rambus
One-week gain: 22%
Silicon Valley chip designer Rambus is best known for its proprietary high-speed computer memory, which competed for market adoption in the early part of this decade but ultimately lost to out to non-proprietary memory now sold on the cheap. Sales for the company are waning and profits are non-existent. So why do the only two analyst who cover the stock recommend a purchase of it, and why is the share price suddenly jumping? For one thing, the company has sued other manufacturers for price-fixing, claiming it was shut out of the market. A trial is scheduled to start in January, with up to $12 billion in damages on the line (compared with a stock market value of $2.2 billion for Rambus), and the possibility of a settlement for a smaller amount. Also, Samsung recently licensed a Rambus architecture for use in its computer memory, perhaps by the end of 2010. Samsung is one of the world s largest memory makers, so Rambus investors are hoping the news paves the way for industry-wide adoption, what one analyst calls the Holy Grail for Rambus. From what I remember of the Indiana Jones movies, greed for holy grails can set off a temple-swallowing earthquake. And from what I remember of the first extreme rise in Rambus shares nearly a decade ago, it s probably best for investors to wait for concrete financial results before buying.
BE Aerospace
One-week gain: 19%
Wellington, Fla.-based BE Aerospace dominates the trade in seats and interiors for jumbo jets. Before the economic downturn, the company was gradually increasing its revenue share of new planes, in part through the sale of swanky lie-flat seats and suites for premium-class travelers. Rising unemployment and a spending downturn over the past year squashed demand for air travel in general and premium seats especially. BE s stock price fell from over $50 in December 2007 to single digits last March. It s back to $23 and change. Margins for the company have stayed healthy, even though sales are down, because management has aggressively reduced costs. Assuming a rebound in air travel will eventually release pent-up demand for new planes, BE s shares seem likely to benefit. They sell for 16 times earnings.



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