3 Stocks Leading the Alternative Energy Charge

by Alyssa Oursler | September 6, 2013 9:28 am

wind185 3 Stocks Leading the Alternative Energy ChargeWhile betting on coal, oil and natural gas has made sense for decades — and should continue to make sense for some time — our current reliance on fossil fuels can’t last indefinitely. Not only are such fuels environmentally damaging to various extents, but we have have a finite amount to work with.

Yet despite that reality, total world energy consumption is slated to increase by over 50% from 2008 to 2035.

The bottom line: We simply have to find new forms of energy — even if just as supplements as opposed to alternatives.

Of course, that’s where alternative, renewable energy sources like solar, wind, geothermal, hydrogen and others come in — they’re naturally occurring sources, are much friendlier to the environment, and theoretically shouldn’t run out. No wonder, then, that use of renewables is expected to triple or quadruple — depending on different policy scenarios — through 2035.

Thus, while the various alternative energy industries are wrought with volatile and even downright crummy stocks, it still could pay to make the right bets in the space. We look at three potential winners — two of which are already some of this year’s hottest names. Take a look:

General Electric

GeneralElectric 3 Stocks Leading the Alternative Energy ChargeGeneral Electric (GE[1]) is a pretty diversified company, and one of its many tentacles includes clean energy.

CEO Jeff Immelt has been working hard to shrink GE Capital[2] since the credit crisis of 2008, and has instead been trying to bulk up the industrial side of the business. The biggest segment for industrials: power and water, which includes a bet on wind turbines.

So far, it hasn’t been off to a rocketing start. In the most recent quarter, GE’s earnings from the power and water segment slipped by 17%. Still, General Electric is leading the way in the wind industry, and thus could be poised to cash in longer-term.

GE is one of the largest and most efficient turbine producers. Its 1.5 MW Series is the most widely deployed wind turbine in the world, with more than 16,500 installed globally. And its 2.5 MW Series was selected for two of the largest wind farms in the world.

Plus, global wind power capacity has averaged a growth rate north of 25% during the past five years. If that keeps up, General Electric could be golden.

The company’s 3.3% dividend should keep investors happy as well.

SolarCity

SolarCity185 3 Stocks Leading the Alternative Energy ChargeNext up, we have SolarCity (SCTY[3]), which calls itself the nation’s leading full-service solar provider. It takes care of the design, financing, installation and monitoring of solar panels for residential and commercial customers, including big names like Walmart (WMT[4]) and eBay (EBAY[5]).

In the most recent quarter, the company’s residential megawatts deployed grew 144% year-over-year, while operating lease revenue rose 79% year-over-year.

SolarCity — which is backed by Tesla Motors (TSLA[6]) CEO Elon Musk, who is the chairman and largest shareholder — also recently acquired Paramount Solar, calling the move its “first step towards our million customer goal.”

Still, plenty of folks aren’t sold on the company. SolarCity remains consistently unprofitable, highly shorted and, as a bearish Barron’s contributor recently noted[7], relies heavily on federal subsidies. What’s worse, the federal government has been “investigating whether SolarCity and some other solar-panel firms possibly misrepresented the value of their systems to receive larger subsidies.”

That hasn’t stopped investors from bidding the stock up, though. Shares jumped around 50% on the company’s first day of trading in December 2012, and so far this year, shares have gained 150%.

Tesla

Tesla185 3 Stocks Leading the Alternative Energy ChargeLast but not least, we simply have to include Tesla on this list.

As the company’s website puts it: “Tesla Motors was founded in 2003 by a group of intrepid Silicon Valley engineers who set out to prove that electric vehicles could be awesome.”

So far, so good.

Tesla is turning heads on the roads, and on Wall Street. Year-to-date, the stock has soared around almost 400% — to the extent that Elon Musk actually said[8] the stock’s valuation is “more than we have any right to deserve.”

The long-term growth that investors are banking on makes more sense when you consider long-term appeal of electric vehicles. For the planet, it means lower carbon emissions and less of a dependence on fossil fuels. For drivers, it means saving money on gas.

Of course, there’s still a long way to go for electric cars to really catch on. Right now, the company’s cars are too expensive for average Joe, while the nation doesn’t yet have the charging stations necessary to support Tesla’s aspirations.

Plus, other automakers are obviously going to try and steal away a slice of the pie. Ford (F[9]) has an electric version of its Focus[10], while Nissan (NSANY[11]) has the Leaf[12].

Still, that hasn’t stopped investors from believing in this industry pioneer. InvestorPlace contributor Jim Woods actually thinks Tesla is the next Apple (AAPL[13]) in the sense that each iconic name started off by building a huge, cult-like following[14].

As of this writing, Alyssa Oursler did not hold a position in any of the aforementioned securities.

Endnotes:
  1. GE: http://studio-5.financialcontent.com/investplace/quote?Symbol=GE
  2. working hard to shrink GE Capital: http://investorplace.com/ipo-playbook/ge-credit-card-spin-off-another-step-for-immelt-plan-ge-cmcsa-bx-wmt-gp/
  3. SCTY: http://studio-5.financialcontent.com/investplace/quote?Symbol=SCTY
  4. WMT: http://studio-5.financialcontent.com/investplace/quote?Symbol=WMT
  5. EBAY: http://studio-5.financialcontent.com/investplace/quote?Symbol=EBAY
  6. TSLA: http://studio-5.financialcontent.com/investplace/quote?Symbol=TSLA
  7. Barron’s contributor recently noted: http://online.barrons.com/article/SB50001424052748704719204579025283044181654.html#articleTabs_article%3D1
  8. Elon Musk actually said: http://video.cnbc.com/gallery/?video=3000193150
  9. F: http://studio-5.financialcontent.com/investplace/quote?Symbol=F
  10. Focus: http://www.ford.com/cars/focus/trim/electric/
  11. NSANY: http://studio-5.financialcontent.com/investplace/quote?Symbol=NSANY
  12. Leaf: http://www.nissanusa.com/electric-cars/leaf/?dcp=ppn.62631567.&dcc=0.239798340&gclid=CPi65NePsrkCFQ5nOgodVioAHw
  13. AAPL: http://studio-5.financialcontent.com/investplace/quote?Symbol=AAPL
  14. huge, cult-like following: http://investorplace.com/2013/09/tesla-how-da-ya-like-them-apples/

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