With energy prices constantly fluctuating, it can be hard to decide the best place for your investment dollars in the energy world. To help you answer that question, we asked some of our Motley Fool analysts to weigh in with their opinions about which energy stock they like right now. In Part 1, the focus was on oil and gas stocks, in Part 2, the focus is consumable fuels and infrastructure, and in Part 3, the focus is alternative energy. Read on to see their ideas.
Sean Williams, TMFUltraLong, Fool contributor
When considering which company is the best energy buy right now, I figured it'd be prudent to focus on the coal sector. Coal generates more than half of the energy that the United States currently consumes, and despite being a "dirty fuel," it offers the safest and most cost-effective energy generation of any fuel source. So when perusing the sector, one name stood out as a clear buy, even after a monstrous 70% run-up over the past year: Alliance Resource Partners (Nasdaq: ARLP ) .
Alliance Resource provides coal to electric utilities for energy generation. It's arguably one of the premier dividend stocks, having raised its dividend in 25 of the past 40 quarters; it currently yields a handsome 4.5%. Alliance Resource's operating margins also handily outpace many of its rivals, including the much larger CONSOL Energy. With nuclear energy's safety coming into question, and Germany taking the lead in moving away from nuclear, coal seems like a clear-cut winner in the intermediate future. As long as Alliance Resources can keep up its torrid pace of dividend growth, shareholders could do a lot worse than this company.
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Michael Olsen, CFA, Motley Fool Special Ops senior analyst
Hate the tolls, not the tollgate. As owner of electric transmission lines, natural gas pipelines, coal terminal, rail assets, and ports, Brookfield Infrastructure Partners (NYSE: BIP ) is the ultimate tollgate asset. These assets are truly one of a kind, and near-impossible to replicate. You might think of it as an annuity stream on the global economy. The economy ticks, and just by showing up, BIP regularly clocks meaty cash flows.
Descended from the storied Brookfield lineage, BIP retains a relationship to parent, Brookfield Asset Management (NYSE: BAM ) . Like BAM, BIP is no pussycat, but an opportunistic, value-oriented investor. Cue 2009, when Australian infrastructure partnership Brown & Babcock Infrastructure, burdened by debt, was heading to its death. Ever the opportunist, a Brookfield-led consortium swept in and snatched up some prize assets for a song. The market yawned.
Cut to today: BIP shares yield a mighty 5%, and its assets are as good as ever. Don't get me wrong: If the PIGS fall off the proverbial debt wagon, BIP's in for some near-term pain. But at 13 times my estimate of this year's cash flow, we're not paying a tremendous sum.
Oh, and if the PIGS end up wallowing? I wouldn't be surprised to see BIP feasting. Case in point: CEO Sam Pollock said he's looking at European assets in just the last conference call.
Click here to add Brookfield Infrastructure Partners to your watchlist.
Tim Beyers, Motley Fool contributor and Motley Fool Rule Breakersanalyst
Venture capitalist Harris & Harris (Nasdaq: TINY ) introduced me to Solazyme (Nasdaq: SZYM ) , but it wasn't until last month's Paris Air Show that I really got how disruptive this biofuel maker could be. Major airlines used the venue to book tentative biofuel supply agreements.
Therein lies both the problem and the opportunity for Solazyme. The conpany didn't ink deals with AMR Corp.'s (NYSE: AMR ) American Airlines and United Continental Holdings (NYSE: UAL ) . Privately held Solena Fuels did. Even so, over the long term, I expect there to be plenty of demand to keep Solazyme, Solena, and their peers busy.
Just look at the numbers. American and United Continental alone spent more than $12 billion for fuel last year as per-barrel oil prices soared above $100. Solazyme may be best positioned to fulfill their needs, presuming it can get it costs down to less than $3 a barrel from $3.44 now.
I believe it can. Why? The company's process -- called "indirect photosynthesis" -- needs no sunlight and is usually at least eight times more efficient than wild microalgae in gathering oil from feedstocks. As a result, cost per gallon has plummeted since 2007. Further gains would be consistent with history. And that's important. In the race to serve airlines and other big fuel consumers, scale and efficiency matter most. Solazyme's catalytic technology should produce plenty of both.
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