These Stocks Beat Canadian Stocks

With its abundance of natural resources, Canadian companies tapping deposits of gold, oil, and gas have seen their stocks soar in the past several years, along with many other Canadian companies. But I've found investments from another sector that are beating the pants off Canadian stocks -- and I know where you can find out more about them.

Would the real hot stocks please come forward
The nearly 5,400 stocks that more than 120,000 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 Canada tag pulls up a list of 63 stocks that have lost an average of 38.7% in the past year.

But CAPS tags can lead you to stocks that have held up far better than the Canada group: Discount, Variety Stores. This group comprises 17 companies that have outperformed the returns of the broader market and the Canada group, with an 11.9% average loss 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 Canada group:

Source: Motley Fool CAPS and Yahoo! Finance, as of Nov. 11.

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

Source: Motley Fool CAPS and Yahoo! Finance, as of Nov. 11.

Shop Wal-Mart, be happy
Consumers looking to stretch their dollars in a tough economic climate are turning to discount stores rather than malls or other retailers like Sears (NASDAQ:SHLD). The king of discount is Wal-Mart and the company's recent performance reflects this. Its stock performance stands out from the rest of the market, even outpacing the other Dow stocks that tend to hold up well in down cycles.  

Positioning itself as the low-cost leader, Wal-Mart saw 2.4% sales growth while major retailers on average saw same-store sales drop 0.9% in October compared to a year ago. In its recent earnings announcement, Wal-Mart reported that profits increased by 10% on a 7.4% increase in sales thanks to solid U.S. operations and growth internationally.

To adjust to the changing market domestically, the company said it will slow U.S. expansion and focus on remodeling some of its older locations. To tap into new growth opportunities, Wal-Mart plans to allocate 53% of its international spending over the next five years in emerging markets like Brazil and India.

While Wal-Mart has been the target of many consumer complaints in the recent past, its strong value proposition in tough times seems to be cutting the company plenty of slack these days. The company also announced it will reduce prices every week until Christmas to spur sales and match consumer budgets, giving more shoppers reason to be happy this holiday season. Nearly 88% of the 1,362 CAPS All-Stars rating Wal-Mart are pretty happy, too, expecting the retailer to continue its market-beating ways.

Discount is hip again
Another retailer poised to benefit from consumers' move away from luxury shopping experiences is discount retailer Costco. The company's fiscal fourth-quarter profit rose 7% as more customers buy necessity items and stay clear of big-ticket purchases. Its fiscal year net income rose 19% to $1.28 billion and revenue rose 13 percent to $72.48 billion for the year.

Costco's strong long-term performance may also have a lot to do with its unconventional operations. Unlike some recent Wall Street executives being criticized in the news, Costco's CEO doesn't receive large bonuses or outlandish compensation. The company pays above-average wages to its workers, which leads to a low turnover and increased morale. As such, more than 94% of the 2,518 CAPS members rating Costco expect it to outperform the market.

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.