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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."