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Solar Shines but Fund Managers Cold-Shoulder Energy

NEW YORK (The Street) -- Solar stocks are the only standout amid an otherwise lackluster outlook for energy companies, as fund managers warned investors to hold fire before attempting to ride the so-called energy revolution.

A brutally cold U.S. winter and ongoing talk of energy independence has failed to buoy the listed energy sector, which has lagged the broader index and even the beleaguered consumer discretionary sector over the past year.

Fund managers noted this is partly due to the dominance of energy giants such as Exxon Mobil  (XOM) and Chevron (CVX), which have faced challenges in production, costs and returns.

But solar stocks are a bright spot.

 


Schaeffer's Investment Research senior technical strategist Ryan Detrick pointed to stocks such as First Solar (FSLR) and SunPower (SPWR) as promising companies. "Solar is where a lot of the action in energy has been and will continue to be as people move away from dirty energy sources like coal " he told TheStreet.

"Energy has generally been a 'blah' sector and only a handful of solar stocks are liquid enough (to invest in)," Detrick said.

Of these, shares of First Solar have risen 47% over the past year while SunPower has jumped more than 60%. This compares to 8% for the broader energy sector and 11.4% for the S&P 500.

More broadly, Randy Warren, chief investment officer of Warren Financial Service, said the key question potential investors faced was whether the global economy would expand quickly enough to absorb extra shale capacity from Australia, the U.S. and Brazil.

The International Monetary Fund last month raised its 2014 global growth forecast to 3.7% with developed economies such as the U.S. and Europe leading expansion amid uncertainty over the outlook for China and other emerging markets.

Warren cautioned investors to wait for an upward move in the listed energy sector or signs of stronger earnings before lifting their exposure.

Shore Path Capital Management chief investment officer Scott Wallace agreed, echoing concerns of an imbalance in supply and demand. But he said some smaller and mid-cap companies were innovating in the sector, suggesting energy remains a stock picker's market.

-- By Jane Searle in New York 

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