These Stocks Beat Alternative-Energy Stocks

Alternative energy has enjoyed a lot of attention from news organizations and investors lately, especially now that governments are increasing their focus on alternative energy and directing huge incentives toward the companies that provide the solutions. But I can tell you tales of investments from another sector that's beating the pants off alternative-energy stocks ... and where you can find out more about them.

Would the real hot stocks please come forward
Using Motley Fool CAPS, investors can get detailed information and community intelligence not only on individual stocks, but also on entire sectors, regions, and industries.

Any of the 5,300 stocks that have ratings in CAPS can be given a descriptor "tag" that groups it with others sharing a certain quality, such as a country of origin, a sector, or an end product. A single click on the Alternative Energy tag pulls up a list of a 44 stocks that, as a group, have risen an amazing 29.7% in the past year.

But using the tags in CAPS can lead you to a group of stocks that have outpaced even the robust returns of stocks in the Alternative Energy group -- and that would be Steel & Iron. The 56 companies under this tag have averaged an even more impressive 45.0% return in the past year.

Each group has its share of winners and losers, of course, and CAPS can be a great resource to dig under the surface and zero in on potential opportunities in each area.

From macro to micro
You can sort tag groups by their CAPS ratings of one to five stars, with five being the best. Then you can view individual companies to show details of just who -- from Wall Street to Main Street -- is bullish or bearish on the company and why. For instance, here are a few of the stocks in the Alternative Energy group.

Now, here's a sampling of Steel & Iron stocks that -- judging by interest in the CAPS community -- investors may want to consider.

Precision growth
Sometimes, the boring job of supplying industrial steel components and assemblies makes for the best investment returns. Actually, finding underfollowed yet strong businesses makes for a winning strategy in many cases. Precision Castparts, a maker of complex metal castings, was a little-known mid-cap company less than a decade ago, but it has since risen to become a little-known behemoth whose sales have grown by more than 50% in the latest fiscal year.

Precision Castparts has benefited from higher production rates of commercial aircraft at Airbus and Boeing in the past few years -- a trend that it expects to continue into 2008. The company is well diversified in various steel component product lines and in target industries, with revenue coming from the aerospace, automotive, and power-generation segments.

And even with its impressive run-up in price this year, the vast majority of CAPS investors rating the company -- 692 out of 702, in fact -- still believe it will outperform the S&P going forward.

Digging steel
Another steel stock winning high marks is Russia's Mechel, a company that covers a large swath of the supply chain of coal and steel products. Mechel not only mines coal and other ores, it also produces semifinished steel products. The company has also been snapping up other mining properties and is even considering an IPO for its mining segment.

Investors who jumped into Mechel and bought before it was too late have enjoyed supersized returns. But even today, CAPS investors remain overwhelmingly bullish about the company's prospects. In fact, a nearly unanimous 270 of the 272 CAPS All-Stars rating the company think it will outpace the general market in the future.

Before you buy ...
Of course, investors don't want to be looking in the rearview mirror to find out where they should be investing now. But the underlying reasons behind dramatic run-ups in stocks or groups of stocks can clarify macroeconomic trends that may significantly affect investments.

Of course, no matter where investing ideas come from, investors should always perform their own due diligence rather than follow crowds or individual recommendations.