This Week's Hottest Sector

Newton's law of inertia doesn't always work in the stock market. For example, the S&P 500 index has lost about 10% of its value since Dec. 31, yet railroads -- Burlington Northern Santa Fe (NYSE: BNI) and Norfolk Southern, for example -- are in the green on the back of record commodity prices.

Insert dovetail here
Stocks in the same sector have a tendency to move in tandem, regardless of overall market conditions. After all, they usually get their revenue from similar sources, and they're similarly affected by events.

Each week, we'll take a look at the hottest sector over the past five days, according to SmartMoney.com's Sector Tracker. Then we'll cross-reference the individual equities against investor data on Motley Fool CAPS, the Fool's free investing community. CAPS can give us a better feel for what both individual and institutional investors say about these stocks.

A surprising sector
This week's top sector is Nonferrous Metals, up an astounding 10.91% in the past five days. This group includes:

Nothing to do with ferrets
A nonferrous metal is simply a metal other than iron, such as copper, lead, zinc, nickel, and aluminum. There are myriad uses for these materials, from construction to consumer goods, and global demand has spiked in recent years with developing markets and their insatiable appetite for commodities.

This week's boost, however, came on the news of concerns about copper and nickel supplies. Yesterday, a UBS report found that the global copper supply has been reduced because of labor disputes at various copper pits, energy issues in Chile, and lackluster production at African pits. A March 26 Barclays Capital report on nickel noted that China's gross refined nickel imports (used in stainless steel) reached an all-time high of 12,600 metric tons in February; meanwhile, RBC Capital Markets said that inventories of nickel remain at historically low levels.

The commodity boom is nothing new to most investors, and CAPS players are not an exception. All the aforementioned nonferrous metal stocks receive four or five stars on CAPS, the two highest ratings possible.

Most CAPS players cite the increasing demand and questionable supply of these metals as reasons to buy the stocks. One such player is DABRASCO, who had this to say about Southern Copper just today: "The demand for copper is ever increasing as it is in so many different products and at the rate that copper theft has increased, more is needed to replace what was there."

Copper theft has indeed been on the rise. In one recent case in California, a Little League team was forced to cancel practices after thieves stole copper wiring from the field's lighting system. In Florida, more than $18,000 worth of brass and bronze pots were stolen from a cemetery. Across the country, local governments are enacting laws to crack down on such thefts by requiring scrap metal dealers to keep better records as to how and from whom they acquire metal.

But is this thievery a sign of things to come, or is widespread knowledge of the commodities boom a contrarian indicator?

Player BlueStarLikes agreed with the latter sentiment this month in this underperform pitch for Freeport McMoRan:

Commodity boom is nearing an end. Mainstream financial media and the average investor are enamored with anything commodity related. Gold and copper prices have likely peaked for a number [of] years the last few weeks!

Even though the majority of CAPS investors would disagree, this Fool (me) would be hesitant to leap into this sector head-first. Unlike oil, none of these commodities have an OPEC-like cartel controlling supply, so news of inventory shortages are typically because of a short-term and temporary event, and not indicative of a long-term sector shift.

Think I'm wrong? Or would you like to comment on another group of stocks? Voice your opinion on Motley Fool CAPS, where more than 93,000 investors are waiting to hear what you have to say. It's 100% free.