At The Motley Fool, we don't usually take a "top-down" approach to picking stocks. Rather than allowing industry or macro forecasts to drive our investment decisions, we focus primarily on each company's fundamentals.

At times, though, it's certainly possible for us to single out attractive stocks by closely watching the market's prevalent trends. Great fundamentals unquestionably lead to price appreciation, but finding companies with those qualities often starts with some keen observation.   

Tagged and bagged
The tagging tool found in our Motley Fool CAPS community is one great way to investigate interesting investment themes. CAPS is home to more than 4,400 rated stocks, and our tags organize those stocks into specific groups for you.

Tags range from obvious index, sector, and country classifications, to more intuitive categories --businesses with "Top Brands," managements undergoing an "SEC Investigation," and even companies that have earned "Military Contracts." There are nearly 600 tags in CAPS for you to explore, and you can view all of them for free right here.

An example, please?
To get you started, we'll walk you through a specific tag and touch on its underlying theme. Since this is the column's inaugural edition, it's only fitting that we start right at home -- my home, that is.

Type the word "Canada" in the tags search box, and these are some of the stocks you'll find:  


Market Cap

CAPS Rating (out of five)

Royal Bank of Canada (NYSE:RY)



Bank of Nova Scotia (NYSE:BNS)



Encana (NYSE:ECA)



Petro Canada (NYSE:PCZ)



Talisman Energy (NYSE:TLM)



Fording Canadian Coal Trust (NYSE:FDG)



Precision Drilling Trust (NYSE:PDS)



For simplicity, I've chosen some of the more well-known, highly rated companies to single out among the 32 stocks that bear the "Canada" tag. All are Canadian-based companies whose shares also trade on U.S. exchanges.

Another cool feature of tags: They provide the returns for each category, sort of like a mini-index. For our group of 32 Canadian stocks, the daily, 30-day, and one-year returns are:


30 Day Return

1 Year Return




Data from Motley Fool CAPS

As you can see, it hasn't been a banner year for our Canuck stocks. This should come as no surprise, since Canada's economy is largely a play on commodities, and therefore highly sensitive to resource prices. Other than the oligopoly known as the "Big 5" Canadian Banks -- RBC, TD, Bank of Nova Scotia, Bank of Montreal, and CIBC -- the 32 stocks in our database are dominated by oil and natural gas producers, precious-metal mines, and drillers.

Thanks to unusually warm weather, natural gas prices have remained relatively soft over the last year. However, for Fools with a positive price outlook for 2007 (and beyond), Canada is definitely a good place to search for ideas. Canada contributes more than 15% of the oil and gas the U.S. consumes, and the Alberta oil sands -- second only to Saudi Arabia's reserves -- should only drive that number higher in the future.

Couple the possibility of higher energy prices with the the beating that Canadian trusts sustained last November -- as a result of the government's decision to start taxing them -- and you've got plenty of interesting plays under the "Canada" tag.

To illustrate, here are three examples from our CAPS community:

  • CAPS All-Star Bobist thinks Canadian stocks, specifically Motley Fool Global Gains selection Precision Drilling, are an ideal way to diversify out of the U.S.: "I like that this is a Canadian company because I consider diversifying my portfolio into selected non-U.S. markets to be a defense against the idiocy in American fiscal policy ..."

  • Regarding energy powerhouse Encana and the oil sands in general, imsaul0968 says, "ECA holds enormous potential in the Canadian oil sands area. As the world tires of the Middle East violence, all the Canadian oil sands firms will get more attention."

  • Finally, 2Cores explains a possible bargain opportunity with one of the trusts on our list: "Fording Coal Trust, like Newalta Income Trust, should benefit from the market's realization that it over reacted to the change in Canada's tax rules. In the mean time, they pay an even bigger dividend on an even smaller P/E."

Tag ... now you're it, Fool.     
Whether you'd like to invest in a specific country like Canada, profit from the recent subprime debacle, or scour through the beaten-down housing sector, finding great stocks often begins by selecting a category of interest, then drilling down to find the goodies.

Our Motley Fool CAPS community is an exceptionally useful way to research a multitude of investment themes and trends taking place in the world around us. Join Motley Fool CAPS to start using the tags tool right away. It's tons of fun, and it won't cost you a cent.

For more CAPS Foolishness:

Precision Drilling is a Motley Fool Global Gains selection. Discover more of the best international stocks with a free 30-day trial subscription.

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. The Fool has a disclosure policy.