Roundtable: The Best Energy Stock Now, Part 3

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 oil and gas stocks, in Part 2, the focus was consumable fuels and infrastructure, and in Part 3, the focus is alternative energy. Read on to see their ideas.

Travis Hoium, Motley Fool contributor
It's no secret that energy prices are rising around the world. As emerging economies like China, India, and Brazil grow, they demand more energy to power industrial production and growing transportation systems.

But amid rising energy costs, there is one sector that is consistently cutting costs: solar power. Over the last decade solar energy has gone from a tree hugger's dream to a viable energy source that can compete with traditional electricity generation sources. Don't let the naysayers fool you -- solar power isn't as expensive as you might think, and costs are only going down.

One of the best ways to invest in this trend is with SunPower (Nasdaq: SPWRA  ) , who is the solar sector's efficiency leader. SunPower's efficient panels help minimize the cost of solar development like land and inverters. And oil giant Total (NYSE: TOT  ) gave SunPower an endorsement recently by purchasing 60% of the company. The bottom line is, it's time to believe in solar power, and SunPower is the cream of the crop.

Click here to add SunPower to your watchlist.

Rich Smith, Fool contributor
If you believe the numbers, Amtech Systems (Nasdaq: ASYS  ) is a screaming buy.

Amtech makes furnaces and related equipment used in the production of "solar wafers" -- one of the key components of solar panels. Now, you've probably heard that the solar power industry is in a bit of a funk, as early European backers of the tech cut subsidies for solar power. Fears that this will hurt sales have former leading lights in solar power Yingli Green Energy (NYSE: YGE  ) and Suntech Power (NYSE: STP  ) both losing value over the past year as the S&P 500 powers ahead.

Not so with Amtech, whose shares have gained 137%. As solar companies see the prices of their products fall, and they scramble to make it up on volume and maintain share in a shrinking market, Amtech supplies the equipment they need to maintain production. It's also supplying investors with a tempting bargain.

Despite its run-up, Amtech today still sells for less than 10 times free cash flow, and 8.5 times reported earnings. Not bad for a company that most analysts think will grow its profits 35% per year over the next five years.

Click here to add Amtech Systems to your watchlist.

Chris Baines, Motley Fool contributor
For energy, I'd stay away from overheated oil stocks and go with Energizer Holdings (NYSE: ENR  ) . Why? Because Energizer has one thing the oil companies will never have: a ... different kind of revenue stream. OK, that and steady free cash flow from a capital-lite business model that keeps going and going and going...

Energizer's cash flow from operations largely becomes free cash flow, with little getting eaten up by meddlesome capital expenditures: In fiscal 2010, the company's $652 million in operating cash flow translated into $544 million of free cash flow for shareholders. Or $0.83 of cash from operations per share.

Compare that to ExxonMobil, which I consider the perennial best of the oil stocks. In fiscal 2010, Exxon had a colossal $48.4 billion in cash from operations, but less than half of that translated into distributable free cash flow.

Now, there's nothing inherently evil about a capital-intensive business, especially one as lucrative and well managed as Exxon. But the danger is that oil exploration requires constant and very large capital expenditures that can't be put off no matter what. Exhibit A is BP (NYSE: BP  ) , which still had to pay a typical $18 billion in capital expenditures (more than 100% of cash from operations per share) despite the oil spill in 2010. That put a strain on their finances, leading to a psychologically painful (though necessary) post-spill dividend cut that drove down the stock price.

Because of this risk, I like to avoid oil stocks unless I can snag them at a sizable discount, which isn't the case right now. I'll stay with the Energizer bunny.

Click here to add Energizer Holdings to your watchlist.

Looking for more ideas? Check out The Motley Fool's free report, "The Only Energy Stock You'll Ever Need."

Dan Dzombak holds no position in any company mentioned. Travis Hoium owns shares of SunPower. Motley Fool newsletter services have recommended buying shares of Energizer Holdings and Total A.. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (5) | Recommend This Article (7)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 15, 2011, at 6:00 AM, MrChapel wrote:

    I am wondering what you think the impact of the new EPA rulings regarding powerplant emissions will have. See this link:

    http://www.chron.com/disp/story.mpl/ap/tx/7652563.html

    Apart from the obvious effects anyone remotely capable of rational thought can foresee (brownouts, unemployment, languishing industry, diminishing taxable income due to unemployment/closing of businesses), this would also negatively impact the coal industry.

    I guess nobody thought it relevant or important enough to respond when Obama said he would do whatever he could to raise energy prices. So, I don't agree with any of your coal industry investments. Care to refute this?

  • Report this Comment On July 15, 2011, at 10:27 AM, TMFDanDzombak wrote:
  • Report this Comment On July 15, 2011, at 1:06 PM, MrChapel wrote:

    Dan, I've read it and I am cross-posting my reply here.

    I find it interesting you emphasize Exelon and National Grid as supporting the measure. A real quick look on the 'net shows that Exelon gets only 5 percent of its capacity from coal. National Grid doesn't even seem to HAVE any coal fired plants, just gas. I haven't gone through the other members of the CEG, but it is telling that these two are so happy about the measure. Of course, they and you forgot to tell us that it is very favorable to them, but I'm sure it's just an oversight, correct?

    I guess that we'll be seeing some M&O activity in the next four to five years, followed up by waivers to the companies who move into places vacated by companies like Luminant Generation?

    I'm sorry but I thought 'due diligence' was the mantra of TMF? I find it hard to believe that an author, who has written more than a dozen articles with regards to alternative energies would make such a mistake.

    Using Exelon and NGG as if they're major coal users makes you look very, very biased, at the very least.

    Here is Exelon, one of your 'biggest users of coal's portfolio of energy generation plants:

    http://www.exeloncorp.com/energy/generation/Pages/generation...

    Here's an article from Reuters on this:

    http://www.bloomberg.com/news/2011-04-29/nuclear-future-is-n...

    National Grid Plc according to Wikipedia:

    http://en.wikipedia.org/wiki/National_Grid_plc

  • Report this Comment On July 15, 2011, at 5:00 PM, MrChapel wrote:

    It shouldn't surprise you that this article is filled with half-truths, whether deliberately or due to negligent due diligence. The writer is a staunch proponent of alternative energy sources, solar in particular. Over a dozen articles penned by him with regards to the solar sector. This is the only article he has written with regards to the coal industry. See for yourself:

    http://www.fool.com/author/1787/index.aspx?source=iapsitlnk0...

    I went back and did a little digging into the power generation abilities of the CEG members:

    Austin Energy owns 3 natural gas plants and part owns one nuclear and one coal fired plant.

    Calpine Corp. operates natgas and geothermal plants.

    Constellation Energy produces 23 percent of output with coal.

    Entergy has 7 out of 263 energy units that use coal.

    NextEra has generation capacity of 2.1 percent for coal.

    NRG has 10 out 46 plants that run on coal. That's 4.6 percent.

    I'm stopping now but I think I've made my point? Am I against a cleaner environment? No. What I am against is government interference that will give unfair advantages to certain parties. What I'm against is purporting to be giving unbiased information, yet not doing so. If I'm wrong, please do feel free to contradict me.

    I'm including the link to the website of the Clean Energy Group, at least, the one mentioned in the article, since there are two organizations with the same name. On the member page, you will find the links to the websites of the various utilities that are members of CEG. It is there, that I've compiled the numbers in this comment.

    http://www.thecleanenergygroup.com/cegcompanies.asp

  • Report this Comment On July 15, 2011, at 5:59 PM, MrChapel wrote:

    Ugh, adn edit:

    NRG has 10 coal fired plants out of 46. That is not 4.6 percent but about 21 percent of capacity. One fifth of their power generation capacity.

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