These Stocks Beat Petroleum Stocks

While consumers have a hard time embracing $4 gas, investors concentrated in energy stocks are enjoying the boom times. But I've found investments from another sector that are beating the pants off petroleum 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 the 105,000-member Motley Fool CAPS community has 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 Petroleum tag pulls up a list of 26 stocks that have gained an average of 32.2% in the past year.

But CAPS tags can lead you to stocks that have outpaced even the near-term returns from the petroleum group: Fertilizer. This group consists of 15 companies that have massively outperformed the returns of the broader market and petroleum group with an 81.5% 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 petroleum group:

Sources: Yahoo! Finance and Motley Fool CAPS, as of June 12.

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

Sources: Yahoo! Finance and Motley Fool CAPS, as of June 12.

One person's trash is another one's treasure
Investors would be hard pressed to find a better time for the fertilizer industry. Soil nutrients such as potash, phosphate, and nitrogen are experiencing a cycle of record demand as increasing wealth in developing nations has more people buying meat, which in turn drives demand for crops providing animal feed.

The fundamentals of many fertilizer companies make this obvious: CF Industries said first-quarter net earnings nearly tripled and sales increased by more than 40%. Chairman Stephen Wilson noted that "the U.S. entered the spring season with low grain inventories and strong demand for corn, soybeans, and wheat," a situation that is expected to keep crop prices at record highs. 

High oil prices and increased investment in biofuels have also contributed to pushing fertilizer and agriculture stocks higher. And the driving forces aren't just confined to soil additives -- demand for agriculture commodities is seeding growth across supporting sectors, too. For proof, just look to the surge in demand for agriculture equipment from companies such as Deere (NYSE:DE) and Caterpillar.

But the largest strain of demand seems to fall squarely on fertilizer companies. For instance, to keep up with the demand from farmers for increased corn plantings, Terra is upgrading one of its Oklahoma facilities to increase its production capacity of urea ammonium nitrate from 300,000 to 825,000 tons annually. With market pricing demanding more efficient crop yields, Potash and Terra are two of the top 10 best-performing stocks since the last recession in 2001.

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 105,000-plus members of the Motley Fool CAPS community help narrow down the underlying reasons behind dramatic run-ups in stocks or groups of stocks and can clarify trends that may significantly affect investments. Just make sure to do your own due diligence rather than simply follow crowds or individual recommendations.