These Stocks Beat Aluminum Stocks

Just as with other commodities, the rising demand for aluminum has helped many companies producing the metal -- as well as their investors' portfolios -- grow well beyond broader market rates. But I've found investments from another sector that are beating the pants off aluminum stocks -- and I know where you can find out more about them.

Would the real hot stocks please come forward?
The 5,500 stocks that more than 115,000 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 Aluminum tag pulls up a list of 15 stocks that have dropped by 2.8% in the past year.

But CAPS tags can lead you to stocks that have outpaced the returns from the aluminum group: Recycling. This group consists of 11 companies that have not only outperformed the returns of the broader market but have also surpassed the aluminum group, with an 8.9% 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 Aluminum group:

Sources: Motley Fool CAPS and Yahoo! Finance.

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

Source: Motley Fool CAPS and Yahoo! Finance.

Oh my Darling ...
Many investors don't know that animal byproducts can make you immensely rich. But stock in recycler Darling International has gone up more than five times in value over the past five years. The company is seeing increased demand for the recycling of used cooking oil from restaurants and animal parts from meat processing to produce animal feed and useable oils for various industries.

A client list of companies that includes McDonald's (NYSE:MCD) helps Darling continue to grow operating cash flow at a tremendous rate. Favorable pricing for the company's finished products helped it more than double its profits in the second quarter, even with increased energy costs baked into operations. Net income reached $24.1 million, more than double the $9.5 million earned a year ago, and revenue jumped from $159.4 million to $220.9 million.

The company also sports a strong shade of green by reducing effects on the environment: It takes approximately 7 metric tons of carbon dioxide from the environment for every 1 metric ton it produces at its recycling centers. Many investors cite solid financials and great growth opportunities in producing biofuels as reasons to like the stock. A solid majority of CAPS members agree -- nearly 98% of the 731 rating Darling expect it to continue its market-beating ways.

Picking through scraps
Metalico makes green operation a priority, not only through the recycled scrap metal it supplies to steelmakers, but also by investing in wind-energy projects and running its truck fleet on biodiesel and diesel fuels. Investors looking for other reasons to consider Metalico don't have to look much farther than its strong ties to the global commodities boom. Soaring selling prices for metals helped Metalico achieve the best quarter in the company's history: Second-quarter sales rose more than 300% year over year, and net income more than doubled to $8.1 million.

Demand for all sorts of metals has kept Metalico's revenue growth stable over the past few years. As the cost to produce metal from scratch has been rising and recycled scrap has become a more sought-after alternative, many investors have remained bullish on the company, including more than 97% of the 1,069 CAPS members rating Metalico who expect it to outperform the market going forward.

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 follow crowds or individual recommendations.