These Stocks Beat Telecom Stocks

With emerging markets like India, Brazil, and China rushing to connect billions of residents, many telecom companies have been reporting tremendous growth -- and their stocks are following suit. But I've found investments from another sector that are beating the pants off telecom stocks -- and I know where you can find out more about them.

Would the real hot stocks please come forward?
The 5,700 stocks that more than 106,000 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. For example, clicking the Telecom Services -- Foreign tag pulls up a list of 64 stocks that have gained 4% in the past year, well ahead of the 9% drop in the S&P.

But CAPS tags can lead you to a segment that has far outpaced the near-term returns from the telecom group: Minerals. This group is comprised of 106 companies that have outperformed the returns of the broader market and telecom group with an 18.3% 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 potential opportunities in each area.

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 foreign telecom services group:

Sources: Yahoo! Finance and Motley Fool CAPS, as of June 5.

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

Sources: Yahoo! Finance and Motley Fool CAPS, as of June 5.

Liquid coal
When talking about pulling deposits from the earth, it's difficult not to include the region considered the mineral capital of the world -- South Africa. Our Motley Fool Global Gains and Income Investor services have both recommended South African miner and gas producer Sasol, as the company is a leader in the basic materials industry.

With the global fossil-fuels market continuing to show strong demand, Sasol's stock has been on fire lately as it takes advantage of its vast resources to produce crude and refined fuels. One of the most intriguing aspects of the company is its proprietary coal-to-liquid (CTL) technology, which holds real promise on alternative methods of supplying fuel. As opposed to cultivating corn for the production of ethanol, Sasol's CTL methods use coal deposits rather than oil to generate refined fuels.

The production of synthetic fuels has not only set Sasol apart from other integrated oil and gas producers, but it has significantly boosted financials as well. The company saw solid 15% gains across the board in the first half of fiscal 2008 -- in revenue, profit, and net income. While operating profits in its Synfuels division dipped 7% compared to last year on a stronger rand and oil hedge contracts, volume was 4% higher with improved production efficiencies.

Taking advantage of the backlash created by higher oil prices, Sasol is also working with the Tata Group and the Indian government to acquire coal fields in India for the production of fuels based on its CTL technology. With similar plans to leverage coal as an energy source in China, some investors see the potential for coal to be the new oil. Even if it doesn't go in that direction, an overwhelming number of CAPS investors believe Sasol has the right combination of assets to beat the market in the future. Indeed, more than 98% of the 1406 investors rating Sasol in CAPS are bullish.

Before you buy ...
Of course, what's happened in the past is no indicator of where investors should be putting their capital 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.