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Long-Term Value in Recent Clean Energy Selloff

Rising Demand Seen in Carbon Fiber

Another choice is Zoltek (ZOLT - Get Report), which is a leading carbon fiber manufacturer. Carbon fiber is used in a wide range of applications, given its high strength-to-weight ratio. Common items requiring carbon fiber include racing bicycles and tennis rackets, but there are many applications in the clean energy space as well. Carbon fiber is used in wind turbine blades (the largest source of revenue for Zolek), and as replacements for the heavy aluminum and steel used in airplanes, performance automobiles and electric cars. As automakers continue to look for ways to meet fuel efficiency standards, mass-market demand for carbon fiber is likely to increase as a means for reducing weight without sacrificing safety.

Zoltek's stock has recovered from the drop seen in 2008, and share buybacks have helped to push valuations back above the $12 mark. On a company level, Zoltek is showing improved fundamentals with record sales leading to profits of $0.66 per share in 2012. Zoltek's balance sheet is strong, as the company shows no net debt and has access to unused lines of credit at excellent interest rates. Analyst forecasts for 2013 show expected earnings per share at $0.52, with a forward P/E of 14. Zoltek is poised for growth in multiple areas, with carbon fiber usage continuing to show expansion into new markets.

Gaining Growth Exposure with Arista

For investors more focused on growth, an excellent small-cap choice can be seen in Arista Power (ASPW). The biggest strength of ASPW is its diversified exposure to a variety of clean energy markets. Arista Power develops and manufactures innovative renewable power solutions in wind turbines, solar energy systems and custom-designed power management systems. Arista had a blockbuster year in 2012, selling its Mobile Renewable Power Station and securing substantial contracts with the U.S. Army.

These positives are combined with an improving cost environment (declining costs in producing solar panels). Arista doubled its sales in 2012, and company forecasts show an expectation for these figures to reach $12 million in 2013. Arista shows impressive diversification in its product pipeline, and the stock makes a solid growth alternative for those looking to gain broad-based exposure to the clean energy sector.

Capitalizing on the Pullback

In 2012, clean energy stocks saw a significant pullback on reductions in government funding. But with a supportive cost environment and improvements in commercial and residential demand, these pullbacks should be viewed as strong opportunities to re-establish positions in the broader uptrend. The companies listed here possess diverse product pipelines as protective measures against downside shocks, and the variety of market outlets puts each choice in a solid position to capitalize on the upturns expected in 2013.

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At the time of publication, Cox had no positions in stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

Richard Cox is a university teacher in international trade and finance. His articles appear on a variety of Web sites, including Seeking Alpha, Marketbulls.net, FX Street and others. Investing strategies are based on technical and fundamental analysis of all the major asset classes (stock, currencies and commodities). Trade ideas are generally based on time horizons of one to six months.
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