However hard the market slams a stock, there's always the chance it'll come bouncing right back. We'll consult our Motley Fool CAPS community to find shares on the rebound, examining one specific sector of the economy in search of companies with rising CAPS ratings.          

There are 84 stocks listed under chemicals in the CAPS' screener; we've unearthed more than a few with four- and five-star ratings. Those accolades mean our 160,000 CAPS members are confident that these stocks will beat the market in the months ahead, but let's see what members are saying about the five below:


CAPS Rating Today

Recent Price

52-Week Price Change

Estimated Long-Term Growth Rate

China Green Agriculture (NYSE: CGA)





Gulf Resources (Nasdaq: GFRE)










KMG Chemicals (Nasdaq: KMGB)





Yongye International (Nasdaq: YONG)





Source: Motley Fool CAPS; Yahoo! Finance.

As the broader market averages have staged a pretty bold recovery, chemicals stocks have done even better, with the average company doubling in value from the year-ago period. Of course, those returns include some strong performances from those above as well as from the likes of ethanol producer Pacific Ethanol (Nasdaq: PEIX), which soared almost 250%, and Huntsman (NYSE: HUN), which tripled in value.

So let's take a closer look at why investors think that some of these other companies won't be jumping from the frying pan into the fire from the market's lofty heights.

Some spring in its step
Bromine, a component extracted from natural brine and which is typically used for flame retardants, fumigants, and water purification, currently accounts for around two-thirds of Gulf Resources' total revenues, but sales of its oil and gas industry lubricants may soon rival that if current trends continue.

Gulf is one of the largest bromine producers in China, as there are only six licenses issued by the state and the other five holders of them generally produce bromine for their own use. That pretty much gives Gulf Resources the market all to itself. Although there are bunches of small, unlicensed bromine producers -- China has shut down hundreds of them -- Gulf's strategy is to acquire them to continue growing in size.

That's exciting stuff on its own, but in 2008, the company began producing lubricants used in oil and gas exploration. Net sales jumped 51% in 2009, compared to a 17% increase in bromine revenues. The risk here is that 30% of Gulf's bromine sales are to just two customers, while one customer on the chemicals side accounts for nearly 25% of sales. It also purchases raw materials from just two suppliers. Losing any of these key partners could materially affect its operations.

Investors remain confident and CAPS member etangko looks at the difficulty another rival would have entering the market.

Largest producer of bromine in China, high barriers to entry, lots of bromine reserves, and modest [return on assets] and [return on equity]. The company is growing both organically and by acquiring small unlicensed producers. They also have conservative financing. GFRE is a good company for the long run.

Munching at the feedbag
Yongye International may not have market exclusivity like Gulf Resources does -- both AgFeed Industries (Nasdaq: FEED) and China Green Agriculture compete in its animal feed and agricultural fertilizer markets, respectively -- but growth hasn't been any less spectacular for it.

Aside from the meteoric jump in its stock price, Yongye recently raised its revenue forecasts because it is expanding geographically and is witnessing higher demand for its products. It now says it will realize as much as $165 million in revenues this year, up from prior guidance of $147 million, a 12% increase. CAPS member pa503 thinks its organic methods resonate, and the CAPS community seemingly agrees, as 97% of those rating it believe it will outperform the market.

Not getting railroaded
Sure, China's economy is still the talk of the cocktail party circuit, but homegrown chemicals specialist KMG Chemicals has a similarly awesome outlook of its own, one that has it laughing all the way to the bank. Perhaps better known as a supplier of creosote used for railroad ties, KMG is betting the tech sector is resurgent, purchasing an electronics chemicals business that expands its presence in Asia.

The stock has certainly been hard-charging. Aside from its 52-week growth spurt, it's up almost 60% since late February,  when it was picked as a stock ready to roar. With more than 92% of the CAPS members rating the specialty chemicals maker picking it to outperform the broader averages, it looks like they stand in agreement.

The ball's in your court
There are many factors that go into whether a stock is a buy or sell, so it pays to start your own research on these stocks on Motley Fool CAPS. Read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made -- all from a stock's CAPS page. Head over to CAPS today and share your thoughts with other investor analysts on whether you think these stocks are ready to bound higher.


China Green Agriculture is a Motley Fool Global Gains choice. The Fool owns shares of China Green Agriculture and Innophos Holdings. Try any of our Foolish newsletter services today, free for 30 days.

Fool contributor Rich Duprey does not have a financial position in any of the stocks mentioned in this article. You can see his holdings. The Motley Fool has a disclosure policy.