These Stocks Beat Internet Stocks

As the dot-com implosion fades further into memory, Internet-based businesses have increasingly flourished, providing plentiful profits for investors along the way. But I've found investments from another sector that are beating the pants off Internet stocks ... and I know where you can find out more about them.

Would the real hot stocks please come forward?
The 5,500 stocks rated by more than 94,000 Motley Fool CAPS community members 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 Internet Information Providers tag pulls up 35 stocks with an average return of 3.7% in the past year -- not bad, considering that the S&P has fallen 7.5% in that same time frame.

But CAPS tags can lead you to stocks that have far outpaced the returns from the Internet group: Waste Management. This group consists of 26 companies that have held up much better than the Internet group, with a 13.6% 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 the company, and why.

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

Company

CAPS Rating (out of 5)

1-Year Performance

Amazon.com (NASDAQ:AMZN)

**

75%

Bankrate (NASDAQ:RATE)

**

41%

CDC (NASDAQ:CHINA)

****

(59%)

Yahoo! (NASDAQ:YHOO)

**

(7%)

Sources: Yahoo! Finance and Motley Fool CAPS, as of close on March 30.

Now, based upon the interest given in the CAPS community, here's a sampling of waste management stocks that investors may want to consider.

Company

CAPS Rating

1-Year Performance

Waste Management (NYSE:WMI)

*****

1%

American Ecology (NASDAQ:ECOL)

*****

33%

Allied Waste

****

(15%)

Stericycle (NASDAQ:SRCL)

****

26%

Sources: Yahoo! Finance and Motley Fool CAPS, as of March 30 close.

Waste not
Companies that haul garbage don't capture the headlines the way Internet stocks do, but waste is a defensive industry, there in good times and in bad. And while companies such as Allied Waste and Waste Management do good business collecting and disposing of residential and commercial solid waste, investors have found some real treasure in stocks of companies that handle more hazardous industrial waste.

Stock in small-cap American Ecology has been on fire, returned more than 750% in the past five years. The Idaho-based company takes care of various types of hazardous and even radioactive waste for commercial and government entities, disposing of the nasty stuff in one of its four treatment and disposal facilities. The company was also recently licensed to treat radioactive material on location at customers' sites, rather than simply removing equipment and materials for treatment at its own facilities.

The expanding services American Ecology has provided over the years have kept the small company growing, with revenue soaring 29% annually over the past five years. And with a growing national focus on the environment and green energy, CAPS investors see demand for American Ecology's services continuing. Of the 269 investors who've rated the company, more than 96% believe that the company will outperform the S&P in the future.

CAPS investors also hold hazardous-waste handler Stericycle in high regard -- enough to give the company a four-star rating. At roughly 10 times the size of American Ecology, Stericycle sees similarly growing demand for the management of hazardous waste, mostly in the health-care sector. In addition to collecting and removing biohazardous materials and sharps from hospitals and clinics, Stericycle helps companies comply with OSHA and other industry regulations, and even performs product recalls for customers.

While specialty waste companies' track record has been spectacular, finding a good value in trash is more difficult today. American Ecology sports a forward P/E of 20.4, roughly in line with its projected 20% growth rate. But Stericycle is trading at a much higher premium, with a forward multiple of 30.7, compared to its 18% projected growth. With the market pricing such a premium on Stericycle, value investors may want to pick through the garbage after shares come down a little.

Before you buy ...
Of course, past events can't accurately teach investors where to place 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.  


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