These Stocks Beat Alternative Energy Stocks

With nations around the globe intent on bringing new alternative energy resources to market, green stocks have been a favorite place for investors of late. But I've found investments from another sector that are beating the pants off alternative energy 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 Alternative Energy tag pulls up a list of 54 stocks that have lost 44.6% in the past year.

But CAPS tags can lead you to stocks that have done better than the near-term returns from the Alternative Energy group: Big Pharma. This group comprises 12 companies that have held up better with a 20.5% 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 Alternative Energy group:

Source: Motley Fool CAPS and Yahoo! Finance, as of Dec. 16.

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

Source: Motley Fool CAPS and Yahoo! Finance, as of Dec. 16.

King of cash
While analysts expect little earnings growth from Pfizer going forward as its blockbuster drug Lipitor faces upcoming generic competition, many investors take comfort in the company's immense cash flow. And even though Pfizer chose to break its streak and simply maintain, rather than raise, its dividend recently, the $14 billion in free cash flow the company generates annually is enough to sustain its dividend payment for many years to come. And with a current yield of 7.3%, that's not chump change.

Even considering that Pfizer could lose a big chunk of revenue in a few years, the company has a couple dozen drug candidates in phase 3 testing that offer some potential. It also holds a large cash and short-term investments position of about $26 billion, giving it plenty of options to buy growth while it's cheap. The company has also been growing its presence in Asia, and like GlaxoSmithKline (NYSE:GSK), Pfizer hopes that its recent jump into stem-cell research will eventually translate into profits.

With a backdrop of a large stash of cash and declining growth already priced in, 89% of the 5,059 CAPS members rating Pfizer expect it to outperform the market.

Stuffing the pipeline
Like Pfizer, Bristol-Meyers Squibb also faces some potential generic competition. Its anti-clotting agent Plavix has brought in more than $4 billion in sales this year but will go off patent in 2011. Combined with cancer drug Erbitux and psychiatric drug Abilify, the company delivered strong third quarter performance, but it is looking at a tougher market ahead and plans to reduce costs by $2.5 billion by 2012.

To get there, the company has been making adjustments to reduce costs including job cuts and reducing internal R&D. But it's keeping its pipeline robust through partnerships and acquisitions, and earlier this year picked up numerous compounds with the purchase of drugmakers Kosan Biosciences and Adnexus Therapeutics. It also recently partnered up with Exelixis to co-develop the cancer drug XL184.

As is the case with Pfizer, investors highlight positive points like Bristol-Myers' strong free cash flow and healthy dividend. With many bullish about the company's pipeline, 91% of the 1,013 CAPS members rating Bristol-Meyers Squibb think it's poised to beat 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

On Jan. 12, 2009, Fool co-founder David Gardner, Jeff Fischer, and their Motley Fool Pro team will accept new subscribers to their real-money portfolio service. Motley Fool Pro is investing $1 million of the Fool’s own money in long and short positions in a range of securities, including common stocks, put and call options, and exchange-traded funds (ETFs). They also incorporate proprietary CAPS "community intelligence" data into their research. To learn more about Motley Fool Pro and to receive a private invitation to join, simply enter your email address in the box below.