As the prices of crude oil and other energy commodities made their historic rise in recent years, alternative energy became an increasingly attractive area for investors looking for big gains. However, the slowing global economy and collapsing oil prices resulted in a massive pullback in expectations for the near-term potential of the formerly red-hot sector, along with huge declines in share prices.
But with dozens of attractive energy names -- from
-- trading more than 50% off their former highs, it may be time for investors to start thinking about some speculative names that have significant upside potential over the next year.
While it makes sense that companies working with solar, wind, and geothermal energy generation became more attractive as crude oil prices skyrocketed above $100 a barrel during the summer, the fall in crude prices doesn't negate the need for energy sources that provide independence from traditional energy commodity prices. Governments across the globe remain interested in the long-term benefits of investing in alternative energy as a means to protect against a future surge in prices, as well as a means to protect the environment for future generations.
In managing the
model portfolio, one of our favorite names in the alternative energy space is a small Chinese company,
A-Power Energy Generation Systems
After a brutal decline that brought the stock from above $30 to around $4 in just four months, shares have stabilized and remain an attractive play for aggressive investors. Shares of A-Power suffered mightily as investors fled small alternative energy names at the end of the summer -- a move exacerbated by the panicked selling that marked the worst October in recent stock market history.
Still, we've remained very excited about the long-term potential in this name, based on its attractive position to benefit from the Chinese government's plan to invest in wind power over the next decade.
As Western reporters visited Beijing during the Summer Olympics, the world got an up-close look at China's massive pollution problem. After years of unchecked industrial production, China is faced with the potential for significant long-term health issues for its huge population -- a problem that makes alternative energy a necessity rather than an economic luxury.
Regardless of the price of oil, coal and other energy commodities, the Chinese government simply has to promote alternative energy sources such as nuclear, solar and wind farms as a means to combat its growing pollution problem.
While the case for alternative energy seems simple enough, the sharp declines that hit almost all stocks in the sector should give investors an idea of how risky these names are. Even large-cap companies like solar behemoth
saw huge selloffs of more than 60% in recent months. But with expectations having come down so far, it's hard to ignore the tremendous long-term potential of some of these stocks. The
model portfolio includes shares of A-Power as well as our favorite solar name.
China Watch: A-Power Not for the Timid (Video, Nov. 3)
To watch the video, click the player below:
var config = new Array(); config<BRACKET>"videoId"</BRACKET> = 1896876280; config<BRACKET>"playerTag"</BRACKET> = "TSCM Embedded Video Player"; config<BRACKET>"autoStart"</BRACKET> = false; config<BRACKET>"preloadBackColor"</BRACKET> = "#FFFFFF"; config<BRACKET>"useOverlayMenu"</BRACKET> = "false"; config<BRACKET>"width"</BRACKET> = 265; config<BRACKET>"height"</BRACKET> = 255; config<BRACKET>"playerId"</BRACKET> = 1243645856; createExperience(config, 8);
Related videos on
: China Watch: Don't Give Up on A-Power (Sept. 15) and China Watch: A-Power's a Sparkler (Aug. 11).
In keeping with TSC's editorial policy, Larsen Kusick doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships. Kusick is a research associate at TheStreet.com, where he works closely with Jim Cramer and works on TheStreet.com Stocks Under $10. Prior to joining TheStreet.com, he worked in options trading and management consulting. He appreciates your feedback;
to send him an email.
Interested in more writings from Larsen Kusick? Check out