Betting on Renewable Energy

President-elect Barack Obama wants the nation to derive 10 percent of its electricity from renewable energy sources by 2012, up from 2 percent today. That comes on top of the global push for green power, making wind and solar power companies a good bet.

In such an environment, Vestas Wind Systems (symbol VWSYF), the world's leading supplier of wind turbines, stands to benefit. Vestas's American depository receipts, which trade on the pink sheets, have fallen about 60 percent this year because of fears that the credit crunch would stunt sales growth.

But profits at the Danish company, which holds 23 percent of the global market for wind turbines, are likely to rise in 2009 as government incentives in the United States, Europe and China boost demand for the devices. The outlook is also sunny for First Solar (FSLR), which makes solar panels. The rapidly growing firm, which has the least expensive manufacturing cost per watt in the industry, has consistently notched up impressive sales and earnings growth. Analysts expect sales, just $48 million in 2005, to reach $1.2 billion this year and nearly $2.1 billion in 2009.

The stock, 44 percent of which is owned by the Walton family of Wal-Mart fame, is down about 60 percent this year. It now trades at about 16 times the estimated 2009 earnings of $7.38 per share, above the market, but only one-third of the expected earnings-growth rate of 53 percent over the next three to five years. And, unlike the experience of nearly every other publicly traded company on the planet, First Solar has seen analysts boost 2009 profit estimates over the past month.

If you'd rather not choose individual alternative energy stocks, you could instead invest in an exchange-traded fund. First Trust Global Wind Energy (FAN) holds such wind companies as Vestas, and Claymore/MAC Global Solar Energy (TAN) owns First Solar, among others.