These Stocks Beat Shipping Stocks

Booming demand around the world for commodities has helped drive shipping rates -- and stock in companies providing shipping services -- through the roof. But I've found investments from another sector that are beating the pants off shipping stocks ... and I know where you can find out more about them.

Would the real hot stocks please stand up?
The 5,300 stocks that our 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 Shipping tag pulls up a list of 57 stocks that have collectively risen 29.9% in the past year.

But CAPS tags lead you to a group of stocks that have outpaced even the market-beating returns of stocks in the Shipping group: Coal. The 17 companies under this tag have averaged an even more impressive 46.3% return 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 potential opportunities.

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

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

Company

CAPS
Rating

1-Year
Performance

Golar LNG (NASDAQ:GLNG)

*****

65%

Frontline (NYSE:FRO)

****

30%

TBS International (NASDAQ:TBSI)

****

280%

DryShips (NASDAQ:DRYS)

**

336%

Sources: Google Finance and Motley Fool CAPS, as of Jan. 31.

Now, here's a sampling of Coal stocks that -- judging by interest in the CAPS community -- investors might want to consider.

Company

CAPS Rating

1-Year Performance

Teck Cominco (NYSE:TCK)

*****

(11%)

BHP Billiton (NYSE:BHP)

*****

65%

Arch Coal (NYSE:ACI)

***

48%

James River Coal   

**

85%

Sources: Yahoo! Finance and Motley Fool CAPS, as of Jan. 31.

The stuff diamonds are made of
There are common forces driving shipping stocks and coal stocks, with one group only being farther down the economic food chain than the other. It makes sense that both sectors would profit from industrial growth -- industries that extract coal and other resources from the earth and those that transport the materials.

But each sector has its own risks and limitations handling supply and demand. Arch Coal, for instance, suffered in the first half of last year as demand dropped from energy facilities and coal prices dipped. Being concentrated in the mining and production of a single commodity was a big drag on financial results -- that is, until international demand drove up export prices for coal. Now domestic producers like Arch are heating up with the global demand.

More diversified miners like Canada's Teck Cominco produce other minerals such as copper and zinc that help buoy results when spot prices in one commodity fluctuate. But Teck deals with its own dragons -- the most prominent one lately being the rise of the Canadian dollar.

After a 40% fall in the past three months, Teck's shares are trading at an attractive eight times forward earnings. The new low price and diversified operations have encouraged 430 out of the 436 CAPS investors rating the company to vote bullishly.

Arch Coal doesn't receive quite as strong an endorsement, yet still has 362 of the 394 investors rating the company believing it will beat the market going forward. You can read all investors' opinions about risks and rewards for Arch Coal and Teck Cominco.

Before you buy ...
Of course, investors shouldn't look in the rear-view mirror to see where to invest now. But the underlying reasons behind dramatic run-ups in stocks or groups of stocks can clarify macroeconomic trends that could affect investments.

Just make sure to do your own due diligence, rather than following crowds or individual recommendations.


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