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Here's one for those interested in investing in the clean energy sector.

Some investors like to follow smart money trends, but those who do should still be wary of stocks with accounting red flags. We ran a screen with this in mind, and our resulting list may interest you.

We started with a list of clean energy stocks from the Ardour Global Alternative Energy Index, the NASDAQ Clean Edge Green Energy Index, the NASDAQ Clean Edge Smart Grid Infrastructure Index, and the Renixx Renewable Energy Industrial Index.

Next, we screened for those with bullish sentiment from institutional investors, with significant net institutional purchases over the last quarter representing at least 5% of share float. This indicates that institutional investors such as hedge fund managers and mutual fund managers expect these names to outperform into the future.

We then focused on stocks with issues in receivables. Although receivables are considered to be an asset, it becomes a risk when receivables grow and revenues decline. We looked through more than 30 balance sheets to find those with negative trends in revenue relative to accounts receivable, with slower growth in revenue year-over-year than growth in accounts receivable, as well as receivables comprising a larger portion of current assets.

Receivables represent the portion of revenue not yet collected, so the smaller the portion of revenue and current assets, the better.

The List

For an ‪interactive version of this chart, click on the image below. Analyst ratings sourced from Zacks Investment Research.

Do you agree with institutional investors that these stocks have a bright future? Use this list as a starting point for your own analysis.

1. Calgon Carbon Corporation (CCC): Provides services, products, and solutions for purifying water, air, food, beverage, and industrial process streams in the United States and internationally.

  • Market cap at $931.97M, most recent closing price at $17.23.
  • Net institutional purchases in the current quarter at 4.0M shares, which represents about 8.29% of the company's float of 48.24M shares. The 2 top holders of the stock are Shapiro Capital Management Company, Inc. and Starboard Value LP.
  • Revenue grew by -1.15% during the most recent quarter ($135.04M vs. $136.61M y/y). Accounts receivable grew by 12.3% during the same time period ($110.86M vs. $98.72M y/y). Receivables, as a percentage of current assets, increased from 35.29% to 40.98% during the most recent quarter (comparing 3 months ending 2013-03-31 to 3 months ending 2012-03-31).

April was a good month for Calgon Carbon. On the 15th the company's subsidiary Hyde Marine, Inc. received initial approval from the United States Coast Guard for its Hyde Guardian Ballast Water Treatment Systems (BWTS). Zacks reports this marks the first time a BWTS has received Alternate Management System approval from the Coast Guard, and the recent decision enables ships to use the system for five years after satisfying the Coast Guard's Ballast Water Discharge Standards. Given the relative lack of industry competition and increased regulation forcing ships to adopt BTWS, the Hyde Guardian has potential to contribute significantly to Calgon Carbon's revenue.

Then on the 24th, the company opened its carbon reactivation facility in Arizona. The plant will reactive granular activated carbon (GAC) taken from water treatment facilities, restoring the GAC to a usable state; local communities such as Scottsdale and Phoenix can then purchase the reactivated GAC, which is significantly cheaper than new GAC. Given that municipal interest in activated carbon products helped increase revenue in the Activated Carbon and Service segment by 1.4%, the progress of the Arizona facility is certainly worth monitoring.

Additionally, Calgon Carbon is presently in the second phase of its cost-reduction plan and stands to benefit from price increases taking place later this year. Furthermore, per Morningstar, the company bests the industry average on 6 out of 8 key statistics, including ROA (4.5% vs. 0.4%) and ROE (6.8% vs. 0.7%). It's worth noting that although the company's revenue fell nearly 1% during the first quarter of 2013, Bloomberg writes its $0.18 EPS on a profit of $9.8 million beat analysts' estimates of $0.145 a share.

2. AZZ Incorporated (AZZ): Manufactures electrical equipment and components for power generation, transmission and distribution, and industrial markets primarily in the United States and Canada.

  • Market cap at $1.07B, most recent closing price at $42.03.
  • Net institutional purchases in the current quarter at 1.5M shares, which represents about 6.17% of the company's float of 24.33M shares. The 2 top holders of the stock are Royce & Associates, LLC and FMR LLC.
  • Revenue grew by 13.56% during the most recent quarter ($140.39M vs. $123.63M y/y). Accounts receivable grew by 31.09% during the same time period ($97.86M vs. $74.65M y/y). Receivables, as a percentage of current assets, increased from 24.66% to 37.29% during the most recent quarter (comparing 3 months ending 2013-02-28 to 3 months ending 2012-02-29).

AZZ is very confident in its fiscal year 2014 performance, most likely buoyed by its strong fiscal year 2013. Back in April, per NASDAQ.com, Zacks reported AZZ expects 39.25% growth in earnings during fiscal year 2014, which dwarfs the industry average of 3.8%. Last week, The Motley Fool contributor Robert Hanley wrote the specialty electrical equipment manufacturer issued a forecast with a 50% gain in overall sales. The company expects a big portion of its overall revenue to come from its Galvanizing Services segment, which stands to contribute significantly due to AZZ's 2013 acquisitions and market share improvement.

Like Calgon Carbon, AZZ seeks to benefit from growing municipal demand, which, in this case, aims to revamp an outdated power grid. On April 1st, AZZ acquired electrical company Aquilex Specialty Repair and Overhaul. Aquilex provides life extension services for plan infrastructure within the nuclear and fossil fuel power generation markets in addition to industrial markets. In AZZ's Q4 2013 earnings call, CFO Dana Perry stated that the results of the acquisition are to be accredited immediately as Aquilex will carry on with existing operations.

The earnings call also revealed AZZ's intention to actively pursue product and market additions given existing positive customer sentiment as well as a strong balance sheet and strong cash flows. However, if the company's receivables continues to grow as it has over the past year, this may very will impact AZZ's ability to generate adequate cash flow.

*Accounting data sourced from Google Finance. Institutional data sourced from Fidelity. All other data sourced from Finviz.

Source: Why Are Funds Buying These 2 Clean Energy Stocks With Troubling Accounting Trends?