The clean energy industry is full of opportunities and landmines, and when the industry changes, investors need to adapt to the times. As the industry moves from a nascent stage to long-term viability, there will be companies that fail and ones that flourish. Below are four companies I think will be big long-term winners in the clean tech space.
GT Solar (Nasdaq: SOLR )
The solar sector has been under pressure recently as subsidies in Europe change and the market deals with fast-growing supply. But one company that isn't hurt by oversupply is GT Solar, which makes equipment for polysilicon manufacturers. The company is working to expand beyond the solar market with the recent acquisition of a sapphire crystallization business that supplies the LED industry.
The $460.4 million deal for sapphire crystallization furnaces sent shares soaring. As both solar manufacturers and LED manufacturers expand, GT Solar will be there to supply equipment they need.
Even with explosive growth over the last few years, GT Solar's shares only trade at a P/E ratio of 10, so there's plenty of value for investors. And one indication the market still isn't giving GT Solar enough love? The company has crushed earnings estimates each of the last four quarters, something I look for in high-growth stocks.
EnerNOC (Nasdaq: ENOC )
Demand response is emerging as a useful way for utilities to curb demand at peak times. These "negawatts" are a big step toward future energy efficiency on a large scale and are breaking all the traditional rules of electricity generation. Companies like EnerNOC and Comverge (Nasdaq: COMV ) get a signal from utilities in times of peak demand, and their partners reduce demand by cutting back on air conditioning or other agreed-upon demand sources.
Recent wins for EnerNOC include rulings from the Federal Energy Regulatory Commission deeming that demand response would be treated equal to generators in the PJM bidding process and that payments to demand response companies could not be limited. This is helping put negawatts on the same footing as megawatts for utilities.
EnerNOC hasn't been consistently profitable, but as the demand response industry grows, that should change.
First Solar (Nasdaq: FSLR )
If you like a company that is an industry leader, is growing quickly, and consistently beats earnings estimates, First Solar is for you. No solar company can match First Solar's $0.75 per watt for solar panels, and few solar companies have had as much success consistently lowering costs.
First Solar's stock has been hurt along with Chinese manufacturers like LDK Solar (NYSE: LDK ) and JA Solar (Nasdaq: JASO ) , but that is giving investors a buying opportunity. First Solar is in great financial shape, and its low cost structure allows more money to flow to the bottom line compared with competitors. Last quarter gross margins were 45.8%, despite pricing pressure, allowing room to absorb the pressure while remaining profitable.
The company's project development pipeline also softens hits the solar industry may take because the company can move panels from wholesale sales into its own solar developments.
As unloved as First Solar has been, it is trading at just 12.4 times 2011 earnings estimates, which have consistently been below actual results. As solar power moves closer and closer to grid parity, we'll hear less about how dependent the industry is on subsidies and more about who will emerge as winners in the sector. First Solar is almost certain to be one of them.
Tesla Motors (Nasdaq: TSLA )
There has been a lot of debate about the future of the electric vehicle. Right now, EVs are somewhere between a fad and revolutionizing the industry -- and depending on where you stand, you could make a strong argument for both. I've questioned Tesla in the past, but I've seen enough to be convinced the future is bright.
Not only is Tesla the only all-electric manufacturer that makes a vehicle with a reasonable range, CEO Elon Musk and Daimler increased their bets on the company. Insider buying can be a great indicator for a stock, and it only gives me more confidence.
The one thing lacking is that pesky profitability, and that won't change as the company ramps up its Model-S sedan. Analysts see the company losing $1.51 per share in 2012, so there's a long road ahead -- but it's one this Fool is willing to take.
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