These Stocks Beat Metal Stocks

It seems as though iron and steel prices are rising almost daily -- and pushing shares of metal-producing companies along with them. But I've found investments from another sector that are beating the pants off metal stocks -- and I know where you can find out more about them.

Would the real hot stocks please come forward?
The 5,500 stocks that more than 110,000 Motley Fool CAPS community members have rated include descriptive "tags" that group them with other companies sharing similar qualities -- a country of origin, a sector, or an end product, for example. Clicking the Metal Fabrication tag pulls up a list of 24 stocks that have gained 27.7% in the past year.

But CAPS can lead you to another group of stocks that have outpaced even the near-term returns from the metals group: Solar Power. This group consists 33 companies that have outperformed the returns of the broader market and metal group with an amazing 54.1% average gain in the past year.

Each group has its share of winners and losers, of course, but CAPS can be a great resource for zeroing in on companies that grow exponentially over time.

From macro to micro
You can sort tag groups by their CAPS ratings, from one to a maximum five stars, and then see which players -- from Wall Street to Main Street -- are bullish or bearish on a company, and why.

For instance, here are a few of the stocks in the Metal Fabrication group:

Company

CAPS Rating (out of 5)

1-Year Performance

Precision Castparts (NYSE: PCP  )

*****

(6.6)%

Graham

*****

253.1%

China Precision Steel (Nasdaq: CPSL  )

****

48.4%

U.S. Steel (NYSE: X  )

****

66.3%

Sources: Yahoo! Finance and Motley Fool CAPS, as of June 20.

Now, based on the interest in the CAPS community, here's a sampling of solar stocks that investors may want to consider.

Company

CAPS Rating

1-Year Performance

JA Solar Holdings (Nasdaq: JASO  )

****

96.2%

Yingli Green Energy (NYSE: YGE  )

****

51.6%

SunPower

***

36.8%

Evergreen Solar (NYSE: ESLR  )

***

27.4%

Sources: Yahoo! Finance and Motley Fool CAPS, as of June 20.

Jumpin' Yingli
Although there's plenty of complexity in the technology and processes of solar players, the forces driving growth boil down to one simple factor -- enormous demand. Even though the global market for photovoltaics grew 62% in 2007 (according to industry watcher Solarbuzz), many solar players are still unable to bring enough manufacturing capacity online to meet demand. As such, Yingli Green, along with its other Chinese solar peers, including Trina Solar and Suntech Power (NYSE: STP  ) , have been enjoying rapid growth while helping the world go green.

Higher European and U.S. demand for solar products drove Yingli's first-quarter profits through the roof. Its net income jumped 20-fold to $31.9 million from $1.2 million. And with plenty of sales contracts lined up throughout Europe and elsewhere, Yingli expects to see some very healthy revenue in 2008. The company recently reaffirmed its outlook for this year and says it expects to see net revenues increase roughly 74%-83% over 2007's numbers. It's no surprise, then, that more than 96% of the 946 investors see Yingli Green as a path to prosperity and have rated it to outperform the market going forward.

Crunch time
Another Chinese solar company, JA Solar, focuses on the solar-cell manufacturing process -- it takes monocrystalline wafers and makes them into energy-producing cells for module integrators. In the early stages of the supply chain, the company has been able to maintain good margins; at the same time, it expands capacity to keep up with demand.

JA Solar's stock has been volatile this past year, but its first-quarter earnings release sent shares springing in a positive direction. Full-year revenue rose 286%, and production capacity has jumped from 75 megawatts to 175. With industry analysts predicting the solar market to grow around 50% per year over the next several years, investors like JA Solar's capability to expand rapidly. In CAPS, more than 93% of the 974 investors rating JA Solar believe it will outperform the market going forward.

Before you buy ...
Of course, what's happened in the past is no indicator of where investors should be looking for stocks to buy now. But the underlying reasons behind dramatic run-ups in stocks or groups of stocks can clarify trends that may significantly affect investments. Just make sure to do your own due diligence rather than simply following crowds or individual recommendations.  

The great potential behind Suntech Power has made it a recommendation of the Motley Fool Rule Breakers service. To see which stocks have the service beating the market by 10 points on average, take a free 30-day trial today.

When it comes to running long distances, Fool contributor Dave Mock lags more than he leads. He owns no shares of companies mentioned here. Dave is the author of The Qualcomm Equation. Suntech Power Holdings is a Rule Breakers recommendation. The Fool's disclosure policy beats all other disclosure policies, year in and year out.


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