Industry Focus: Financials host Gaby Lapera's resolution for the New Year was to buy at least five stocks this year, one from each sector on the Industry Focus family of podcasts.

In today's Energy episode, she interviews Motley Fool analysts Sean O'Reilly and Taylor Muckerman about two stocks they think would make great buys for long-term investors: 8point3 Energy Partners (NASDAQ:CAFD) and General Electric (NYSE:GE).

Find out what makes both companies such compelling investments, how energy yieldcos work and why 8point3's dividend yield is a whopping 7.4%, how GE's merger with Baker Hughes (NYSE:BHI) will affect the energy giant, two pieces of general advice for any beginning investor, and much more.

A full transcript follows the video. 

This podcast was recorded on Feb. 10, 2017.

Sean O'Reilly: Welcome to Industry Focus, the podcast that dives into a different sector of the stock market every day. Today is Thursday, Feb. 9, 2017, so we're talking about energy, materials, and industrials. I am your host, Sean O'Reilly, and joining me today in studio is my arch-nemesis for the day, Mr. Taylor Muckerman, and our special guest, Industry Focus: Financials host Ms. Gaby Lapera. How's it going, guys?

Taylor Muckerman: Arrr. That's my pirate sound.

Gaby Lapera: Hi!

O'Reilly: Pirate? Really?

Muckerman: Yeah, I'm your arch-nemesis, old school, pirates. I don't know.

O'Reilly: You should be over there in a gray pantsuit with a white cap, like a Blofeld-y, James Bond kind of thing.

Muckerman: We're talking about more than just one billion dollars today.

O'Reilly: Oh, God. I want to watch Austin Powers now. So, Gaby, this week on each and every show, we are each going to be discussing stocks that may or may not be of interest to somebody that may or may not be starting up a stock portfolio. Did I frame that right?

Lapera: Yeah, that's actually a good introduction to some of the legal disclosures that I need to give, which is that Taylor and Sean are not providing personal advice for me, because if we do, the regulators-slash-the lawyers will come after us. So today, they're just going to be pitching stocks that they like, that they think are interesting and are worth buying. They're not pitched directly to me, and they definitely aren't pitched directly to you, mostly because they probably don't know you, but also, like I said, because we could get into a lot of trouble. Some of the other disclosure stuff that I have to tell you is that we have trading restrictions at The Motley Fool. We have a disclosure policy, and we have to publicly disclose if a contributor has an interest in any of the stocks mentioned. You want to know if Sean or Taylor has an interest in any of the stocks mentioned, you can look at the article that we produce after, or look at either of their TMF pages. Additionally, Fool employees work under trading restrictions which say that we have to hold the stock for at least 10 days, which makes sense, because day trading is pretty much the antithesis of what we do here at The Motley Fool. It also says that we cannot write or talk about a stock on air for a period of two market days before to two market days after purchasing or selling a stock, which means that none of us have bought or sold any of these stocks in the past two days, and we won't for the next two days. That's just to make sure that we're not manipulating the market, because we're so powerful at The Motley Fool that that's something that we can do.

O'Reilly: Which is why we wear the evil Blofeld pantsuits and have cats. We're going to take over the world.

Lapera: I'm really allergic to cats.

O'Reilly: You are? Me, too!

Lapera: Yeah, they make me sneeze. I like them, but, sneezy.

O'Reilly: So we are not giving you advice, but we do want to talk to you about a couple of stocks that we find interesting in the energy and industrials sector. Taylor, do I go first? Do you want to flip a coin? What should we do?

Muckerman: You go first.

O'Reilly: All right. So, Gaby, I want to talk to you about my pick in the energy and materials space, which is 8point3 Energy Partners. What the heck is 8point3 Energy Partners?

Muckerman: I'm interested, too. I'd never heard of this company until you brought it up last week.

O'Reilly: Really? You're serious?

Muckerman: I'm dead serious.

O'Reilly: Oh, wow. Get out your pencils, kids. It is actually named after the time it takes for light from the sun to reach the Earth. It takes 8 minutes and 20 seconds for sunlight to reach the planet. Twenty seconds is a third of a minute, so, hence, 8point3 Energy Partners. It was formed as a joint venture between First Solar and SunPower and is known as what is called a yieldco. This is actually analogous to something that you know a lot about, Gaby, which is REITs, real estate investment trusts.

Lapera: I do know a lot about those.

O'Reilly: So how does a REIT run their business? They own buildings, they charge rent to tenants, they try to expand their foothold by occasionally selling shares or debt, buying new buildings, building new buildings, etc. It is not uncommon -- correct me if I'm wrong -- for a REIT, over the years, to have more and more shares outstanding. That's kind of what happens. Or, they just stay stagnant.

Lapera: It depends on the REIT. I'll say that. But, this isn't a REIT show, so continue. 

O'Reilly: The other thing REITs do, of course, is pay out dividends to investors.

Lapera: Right, 90% of their taxable income.

O'Reilly: Right. Same deal with these guys. It is more or less the same business model. First Solar and SunPower build and install solar panels, and installations. It's mostly for industrial and large corporate customers, compared with a Tesla or SolarCity that do rooftops. They created 8point3 Energy Partners to buy these projects, because, as you can imagine, it's not the easiest thing to do to build a $400 million solar-panel array in the middle of the desert and just keep that in your books forever. It is nice to be able to spin that off, maybe keep some of the revenues for servicing the project, but that is how they function. They created 8point3 Energy Partners together with its subsidiaries to acquire, own, and operate solar-energy generation projects in the United States. As of right now, at the end of Nov. 30 -- they have not reported earnings yet -- they own nine utility-scale solar-energy projects and have a total capacity of 642 megawatts of electricity. It is a beautifully simple business model. It owns a bunch of solar panels; it contracts the energy generator for them out to utilities and pays out the cash to shareholders. 

"Sean, what is this dividend yield that you keep talking about," you're wondering. Currently, it has a current quotation of about $13 and a half per share. It has a dividend yield of 7.4%. That's pretty darn good in a world where Treasury bills are yielding 3%, where we're at the very top of what has been an eight-year bull market. It actually compares very nicely with the average long-term returns of the stock market, which, in the last hundred years, as you know, was 8%. And, to boot, it is green. They own solar panels and free energy.

Lapera: So I feel good.

O'Reilly: You feel great. You're making 7% a year.

Lapera: I mean, investors in general feel good, not me in particular.

O'Reilly: Of course. You would never feel good. You would never feel anything about --

Lapera: Like the planet, you might feel good about this stock. Continue.

O'Reilly: The lawyer over in the corner is looking at us. That's it; it's meat and potatoes. The company is projected to grow its dividend by about 12% this year. They are projecting long term to grow their dividend by about 15%. That is subject to revision based upon the number of projects that they are able to purchase from their sponsors. The pipeline of First Solar and SunPower does, more or less, appear to be rather lengthy. They do have a number of projects coming on board in the next couple of years that they'll be buying. And the last question I'm sure you're wondering is, how long will this continue? Because utilities won't just buy power from these people indefinitely without talking about it again. The average length of their current contracts for all their projects -- meaning they could actually stop right now buying projects from First Solar and SunPower, not expand at all, just keep hanging out, literally doing nothing but collecting money from selling electricity from the utilities -- the answer is 20 years. You could just sit there and do nothing for 20 years and get 7% per year off this thing. And you're saving the planet. Yay.

So, Mr. Muckerman. I brought up 8point3 Energy Partners as a stock that may or may not be of interest to people. What do you have for them?

Muckerman: Well, for investors looking to get into the energy space, and industrials, I guess, GE. You might have heard of that one.

O'Reilly: Did Thomas Edison start that?

Muckerman: It's somewhat boring, maybe. It's not a new company like 8point3.

O'Reilly: Founded in 2015.

Muckerman: But it's making a lot of money and it's diversified. And when I'm thinking about energy as we move forward in the world, we're not done with fossil fuels yet, but it's not far off. So I'm hedging my bets. I'm going to profit from fossil fuels now and renewables later. Even a little bit now. So when you look at GE, I think the big story with them right now is the combination of GE Oil & Gas with Baker Hughes, probably going to finalize itself here in 2017. What you're basically looking at is GE owning 62.5% of the joint venture, and Baker Hughes owning 37.5% of the joint venture. GE already is making over $15 billion in the oil and gas space. That was in their 2015 revenues. Up slightly in 2016. Very well diversified across five different business units within oil and gas. Carved out a niche in turbo machinery and the digital solutions space that you're looking at with this company. Turbo Machinery, actually the biggest of its five oil and gas divisions, also lends itself nicely to wind power generation. Looking at this company, it's going to have some cost synergies, it's going to be the second largest equipment and services company in the world when it comes to oil and gas, right behind Schlumberger, ahead of Halliburton, a company that I have owned for several years -- Halliburton, I mean. 

So, that's what I'm looking at with GE in the moment. But we're long-term investors here at the Fool, so I'm looking at it kind of where Sean's investment thesis came from with 8point3, we're talking about renewable energy. GE offers you exposure to wind, hydro, and solar. Right now, they had a record onshore wind year in 2016, booked 7 gigawatts globally, which was up almost 20% from 2015. Total installed base globally now stands at 57 gigawatts. They're working with countries all around the world, Japan, India, Germany, Greece, Saudi Arabia. Basically, their stated mission is to make clear that renewable energy is an unstoppable force. So I agree. You look at solar in the United States creating more jobs last year, in terms of percentage growth, than any other industry in the United States, that's basically my pitch. It has great exposure to oil and gas now, and it's building a very impressive portfolio of renewable energy for the future.

Lapera: OK. I have questions for both of you.

Muckerman: Yeah, what's up?

Lapera: I'm going to start with you, because you just went. But you can jump in on this question, too, because this is kind of a general question. I need some context for a gigawatt. How much is a gigawatt?

Muckerman: 1,000 megawatts.

Lapera: Right, but, in terms of --

O'Reilly: Have you ever seen Back to the Future?

Lapera: Yes.

O'Reilly: You need 1.21 jigawatts to power the flux capacitor.

Muckerman: Jigawatts or gigawatts?

O'Reilly: Gigawatts, I'm sorry.

Lapera: I wouldn't have even blinked at jigawatts, because the science in that movie is questionable.

O'Reilly: It's a bolt of lightning -- what's questionable -- I'm kidding. 

Muckerman: Very, very frightening.

Lapera: How much does that mean for a regular person? How much does a regular household use? How much does a city use? Some scale -- I mean, 7 gigawatts sounds like it could be a lot.

Muckerman: If you're looking at -- 1 gigawatt could realistically power 300,000 homes.

Lapera: Oh. OK.

Muckerman: So that's a lot of energy there.

Lapera: So 7 gigawatts is a lot.

Muckerman: Yes, it is. If you got it straight from the source, you're probably looking at 750,000 homes. But, obviously, you have to account for transmission loss and things like that. So probably right around 300,000 homes per gigawatt.

O'Reilly: To do the math, 8point3 Energy Partners currently generates enough electricity to power about 200,000 homes, two-thirds of that. But it's all from the sun.

Lapera: Fair enough, I just needed some context for that before I understand.

Muckerman: Yeah, I don't know how many homes there are globally, but 57 gigawatts, I'll do some math here -- it's a lot of homes.

O'Reilly: That's a lot of homes.

Lapera: That's a lot of homes. That's really impressive.

O'Reilly: I think, when Warren Buffett installed his Iowa wind farm -- this was about five or 10 years ago now -- do not quote me, anybody, I think it was going to be enough electricity to power 800,000 homes, and that is, like, the crawl space of my mind -- I think that's the number.

Muckerman: We will hold you to that.

Lapera: It's so windy in the Midwest. I just need a second to talk about this. I moved to Nebraska in 2012, and everyone was like, "Oh, it's going to be so cold!" No one told me about the wind. 

O'Reilly: Which was important.

Lapera: No one said anything to me!

O'Reilly: You were up there in Lincoln, Neb., right?

Lapera: I had to buy shorts to put underneath all of my dresses, because you never knew when it was going to get too windy! It was crazy, crazy. Anyway, just in case you were thinking about moving to the Midwest, please take that into account.

O'Reilly: Well, that was the thrust of the argument -- I don't know if you heard about it when you were out there, but in 2008, the oil billionaire T. Boone Pickens, he had what was called the Pickens plan, and he wanted to install a ton of wind turbines in the Midwest, and he talked about how they're the Saudi Arabia of wind.

Lapera: They are.

O'Reilly: And he showed this map of North Dakota or something all the way down to Oklahoma, and it's what you're talking about, there's more wind in that corridor of the United States than --

Lapera: And it's freezing wind, just in case you were curious.

Muckerman: Well, look at just a few years ago -- 12 states produced 80% of our wind energy in the United States. You're talking about Texas, Iowa, California, Oklahoma, Illinois, Kansas, Minnesota, Oregon, Colorado, Washington, North Dakota, and Wyoming. So, pretty much the entire middle of the country, plus California.

O'Reilly: Buy your shorts. [laughs] 

Lapera: Yeah, that's in the summer. In the winter, ugh, it's so bad. They have this thing called runzas there, and they do Temperature Tuesdays. I don't know what happens when the temperature goes negative, which is pretty often.

O'Reilly: Runzas?

Lapera: Yeah, like a little Polish empanada. It did not sit well with me, I'll say that. But they sell you this runza for whatever the temperature is outside. If it's 25 degrees, the runza is $0.25.

O'Reilly: Oh, wow. Cool.

Lapera: Maybe if it was negative degrees and they were giving them away, I might take one, but probably not.

O'Reilly: They'll pay you to eat it.

Lapera: What is Baker Hughes? You said that a few times. I have no idea what they are.

Muckerman: Baker Hughes is/was the third largest energy oil and gas equipment and services company behind Schlumberger, Halliburton, then Baker Hughes. Like Halliburton, it derives a little bit more than half of its revenue from North America. The rest of it is international. Schlumberger is the opposite, it relies more heavily on the international market than North America. That's another reason why I like this acquisition -- in my mind, what you're going to see and what you are already seeing is North American land drilling has picked back up with some pretty decent ferocity now that oil prices are back in the $45-$55 range. So I like that exposure, especially if you look at the incoming administration, very favorable terms when they talk about fossil fuels. So I like the exposure that Baker Hughes gives General Electric to the North American land drilling market. We're talking about shale in Texas and Oklahoma, North Dakota. We'll probably get into onshore in a few years, which, GE does have some good expertise in the subsea market. So very well-rounded, now that they're about to be together.

Lapera: Cool, thank you. Question for you. Why is 8point3's yield so high? High yields make me very nervous because I come from the financial sector, and that means hinky accounting is going on.

O'Reilly: You are wise to be suspicious. 

Muckerman: What is the yield?

O'Reilly: It's 7.4%. The reason is, recently, SunEdison went bankrupt, and it has two yieldcos. They had TerraForm Global and TerraForm Power. And things are not going well over there. The yields on those are astronomically high, and it's because of the association with SunEdison; you wonder who owns these projects and what's going on. Everybody owes everybody else money; there are all the problems. So there is a sector overhang to the yieldcos because some investors have gotten burned with that, and they're like, "Nah, I'm not going over to 8point3 Energy Partners, it's not happening." Fortunately, it is jointly owned by these two companies, so you can imagine a scenario where, let's pretend one of them goes bankrupt; the other one will more than likely be around to keep things going, keep it funded, buy the stake in the other one. SunEdison is going through bankruptcy, and the ownership of these yieldcos, the part ownership, I should say, of TerraForm Global and TerraForm Power, that's in bankruptcy court, so that tosses all kinds of questions up in the air, and nobody wants to touch it.

Lapera: So, listeners, I think that the thing that Sean is getting at here is that, when a stock's price goes down, its dividend yield goes up. So when there's problems with the stock, even if it's not fair, even if it's just the economy in general, the dividend is going to go up. So it's up to you to decide whether or not the stock itself is safe. Interesting, OK. Question for you again. To Sean: 8point3 Energy Partners, are they only doing American stuff? Is there any international exposure?

O'Reilly: They are just the United States right now. I'm done.

Lapera: OK, excellent.

O'Reilly: There are no current plans to expand internationally. I think there's plenty of room for growth here in the United States. Any time you go international, it's like, "OK, now I have to bribe a politician, I have to contract it out with a utility I've never talked to before," you have to worry about owning solar panels in less stable countries, sometimes ...

Lapera: That's totally fair. Just curious. Taylor, GE. GE is not just in the energy space. They have a lot of other stuff going on. They have GE Capital, which we talk about occasionally on the Financials show. They have all sorts of other stuff.

Muckerman: Yeah, healthcare.

Lapera: Exactly. So, for you, is that one of the perks? Do you know anything about that side of the business? 

Muckerman: I don't know as much. But yeah, it is a nice little perk, because you have some hedging there, not only within the energy space with renewables and fossil fuels, but also economic growth around the world on the industrial side, then advancements in healthcare as well. And I don't know much about GE Finance, not as much as I should.

Lapera: We can talk later. 

Muckerman: Yeah, that's fine. You can pitch GE back to me from a different perspective.

O'Reilly: Love it. Actually, that would be fun. Then we could get Kristine [Harjes] in here for the healthcare angle. 

Muckerman: Yeah, an all-GE show.

Lapera: All GE, all the time.

O'Reilly: We could all come on the show and talk about General Electric.

Muckerman: You'll have to leave the consumer-goods folks out of it, but tech could hop on, too, with the Internet of Things.

O'Reilly: Yeah. Really quick, Taylor, I was just curious, is GE's only competition for the wind turbines Siemens? What's the deal there?

Muckerman: Oh, there's other competition. Not always publicly traded, though. But yeah, there's not only two companies in the world producing wind turbine supplies, yeah.

Lapera: Do you guys have any other questions for each other?

Muckerman: Not really, man.

O'Reilly: No, I'm good.

Muckerman: Pitched it pretty well. Which one are you going to buy? Or are you going to buy both of them?

Lapera: I need to go and do some more research on them, because GE is pretty complicated, and 8point3 is a structure that I am unfamiliar with. So, as with all the other shows we've done this week, I'm going to go home, do a little research now that I have a couple of pitches.

Muckerman: That's fair; that's smart. Our listeners should do the same thing. Much more research. Do not take us at our word.

O'Reilly: You know what we should have done is we both should have picked gold.  

Muckerman: No way. I stay far, far away from the miners. Just a quick little note, I looked up, there's 125 million to] 126 million households in the United States. So that 57 gigawatts of energy that GE has installed globally from renewable sources could power up a little over 10% of those.

O'Reilly: Beautiful. Brings a tear to my eye.

Lapera: That's pretty impressive.

Muckerman: I mean, it's pretty awesome, right?

Lapera: This is such a feel-good show, except for all the fossil fuels.  

O'Reilly: Don't you feel all optimistic about the future of mankind?

Lapera: Thank you guys very much. The way that I've closed all the other shows is I've asked each person for a little bit of investing advice for beginners. Sean, if you want to go first? I know you've already given one, but if you have any other nuggets of knowledge -- I hate the word "nugget." I can't believe I just said that.

Muckerman: What did he already say? I missed it.

Lapera: He said make a bear case.

O'Reilly: Oh, make a bear case; invert the thesis. I'm going to say invest in what you know. It's not going to be a Buffett-y type of thing. I just know that the first stock I ever bought, this thing went up a bunch and it was awesome, was United States Gypsum Corporation, and I bought it because my dad was finishing our basement when I was 15, and I couldn't help but notice that all the drywall he was buying was USG sheetrock gypsum. You can find it at Home Depot. It's one of those products --

Muckerman: Observant little son of a gun.

O'Reilly: Thank you. It's one of those products where you go to Home Depot or Lowe's, two major competitors, and they both sell only one brand of drywall, and it is USG sheetrock. So that was a nice little invest-in-what-you-know. I had faith and confidence, it went down after I bought it but I held on, and then the housing bubble happened and it turned out well. [laughs] 

Muckerman: Perfect. Mine, I have two. Read fool.com. Great free content there.

O'Reilly: Oh my gosh.

Muckerman: Maybe even subscribe to a service or two.

O'Reilly: Facepalm.  

Lapera: It's not like they pay us to say stuff like this.  

Muckerman: But also, create a watch list for yourself so you can keep track of stocks.

O'Reilly: That's a good one. Can you create the watch list on fool.com, Taylor?

Muckerman: I believe you can. I haven't, I use Google Finance, so, not quite as much of a --

O'Reilly: He means yes. 

Muckerman: Not quite as much of a home-oriented as I might have just let on to be, but yeah, create a watch list. Generally, what I'll do is, I'll add a stock where you can simulate buying one share. That way if the stock drops a lot, I can buy another share to see how it might rebound, or see if it continues to drop, so you can dollar-cost your average of your watch list, just to see how the stock is performing over time. So maybe you don't add it to your watch list at the high and then be like, "Oh, this stock crashed; I need to buy it!" Maybe it was just a little overvalued, and now it's fairly valued. Or maybe if you add it to your watch list at the bottom and it skyrockets, you're like, "It's way overpriced, look at the watch list, I missed out," you might not have missed out; maybe the market is just finally catching up to it. So don't just add it and leave it. You can dollar-cost average, just like you showed in your regular portfolio, I believe, into your watch list.

O'Reilly: Cool.

Lapera: Excellent advice. Thank you guys so much.

O'Reilly: You bet. Thank you for joining us on the show, Gaby.

Muckerman: Yeah, absolutely. A pleasure.

O'Reilly: Do you have another disclosure you need to read? 

Lapera: No, it's your turn to read the disclosure.

O'Reilly: Yeah, can I? Yeah. That is, if you have not guessed, it for us, folks. Be sure to tune in tomorrow for the Technology show. If you're a loyal listener and have questions or comments, we would love to hear from you. Just email us at industryfocus@fool.com. As always, people on this program may have interests in the stocks that they talk about, and The Motley Fool may have formal recommendations for or against those stocks, so don't buy or sell anything based solely on what you hear on this program. For Taylor Muckerman and Gaby Lapera, I am Sean O'Reilly. Thanks for listening, and Fool on!

Lapera: And thanks, Austin!

O'Reilly: We love you, Austin!

Gaby Lapera has no position in any stocks mentioned. Sean O'Reilly has no position in any stocks mentioned. Taylor Muckerman owns shares of Halliburton and Tesla. The Motley Fool owns shares of and recommends Tesla. The Motley Fool owns shares of General Electric and Halliburton. The Motley Fool recommends Home Depot. The Motley Fool has a disclosure policy.