Alternative Energy Companies

Now’s The Time To Buy Wind, Solar and Geothermal Blue Chips

There’s no other way to say it: alternative energy companies are getting hammered.

The situation: it’s the same one affecting nearly every other sector of the market–a credit crisis.

You know the story by now. Shady mortgage practices led banks to invest billions, perhaps more, in troubled mortgage-backed securities through a range of financial instruments, including derivatives.

Slews of homeowners began to default on mortgages they couldn’t afford, and a domino effect ensued. All those investments, sometime leveraged 20 to 1, became basically worthless. This has led to billions in write-downs, a loss of investor confidence, and utter drying up of once easily accessible credits.

For businesses, this mean less access to short-term loans and capital they need to conduct day-to-day activities – like make payroll.

On a grander scale, this means financiers and investors aren’t as willing to take on new projects. With regard to renewable energy, it means a slowdown in the amount of new wind farms, solar installations, and similar projects that are announced and executed.

Alternative energy companies are already being negatively affected, as we’ve seen share prices significantly drop over the past few weeks.

While there is certainly a lot of bad on the table, the good is still out there. The companies that can harness the good, and battle through these rough times, will surely have prosperous times ahead.

Let’s poke around to find out just how much good is out there, and which alternative energy companies are likely to harness it and profit.

Alternative Energy Companies: Now or Never

Here’s the deal with alternative energy companies, I’m going to use solar as the base case, since that’s the most widely followed sector.

In most cases, stalwart alternative energy stocks traded flat from April until September.

Some of the larger solar companies, like First Solar (NASDAQ: FSLR), SunPower (NASDAQ: SPWR), and Suntech (NYSE: STP) lost value in the first portion of that time frame, and actually gained ground from July until September.

If you remember, that’s when the financial markets really started to implode. Alternative energy companies sold off along with the broader markets, and have remained down on continued credit fears, a lack of confidence, and worries that a global financial slowdown or recession could stymie the growth of the alternative energy sector.

Many great stocks are hovering around their 52-week–or even their all-time–lows.

That begs the question: will these stocks head lower, or will they rebound. It’s now or never.

Alternative Energy Stocks: A Shot in the Arm and a Kick in the Rear

There’s a growing school of thought that says investing in alternative energy could actually be a solution to, rather than a victim of, the financial crisis.

That’s why as part of the $700 billion bailout, the Senate added numerous tax incentives for renewable energy. The two most important are the production tax credit (PTC) for wind and the investment tax credit (ITC) for solar, which allows homeowners and utilities to recoup 30% of the initial cost of a new solar photovoltaic system.

The idea is that by incentivising renewable energy production, new projects will be initiated, which would stimulate new investment activity as well as create jobs–two much-needed activities in a failing economy.

It’s been estimated that ‘green jobs’ could bring an additional 4.2 million jobs to the American economy.

Of course, new projects in both the solar and wind industries also means increased demand. That means more panels, turbines, and services sold, which ultimately leads to increased bottom lines for alternative energy companies.

Not only that, but even with an economic slowdown, energy use isn’t expected to wane in any significant way.

That means that while some industries may be affected (think of people buying Hyundais instead of BMWs), the energy industry, specifically electricity production, should be little affected.

So here’s what I propose. Go ahead an load up on the blue chips of the green world. I’m talking about the bigger companies, that may have been overvalued a few months ago, but that are now ripe for the picking.

My shortlist would include:

Solar Energy Companies