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By David Sterman

The road to a greener future has been a bumpy one for investors. The entire spectrum of clean energy stocks have risen and fallen in tandem with changing government policies and wildly swinging fossil fuel prices. Yet the industry has made considerable inroads as industry revenue for solar, wind and efficiency companies have risen nicely higher in recent years.

At the moment, investors are jumping back on the bandwagon of clean energy stocks. For example, the PowerShares WilderHill Clean Energy Fund (NYSE: PBW) has risen +25% since late August. Yet even as many clean energy stocks have moved up sharply off of their lows, a handful of stocks remain stuck in the mud due to company-specific problems. Here's a quick look at five industry laggards -- at the end, I'll select the one most likely to rebound.

A123 Systems (Nasdaq: AONE)

This maker of advanced batteries was supposed to be a great way to play the burgeoning electric car market. A123 pulled off a well-received IPO about a year ago, but a series of missed quarterly targets has pushed shares down more than -70% from their peak. Investors came to realize that profits will likely be elusive for the next several years, as the electric car market will evolve at a slow pace.

But A123 has another problem on its hands. A pair of giant lithium-ion battery makers -- Japan's Panasonic ( PC) and Korea's Samsung (OTC:SSNLF) -- have recently stated plans to radically boost spending to retain industry dominance. They also plan to cut prices to pursue market share, and that's a battle that relatively tiny A123 is ill-equipped to fight. So even as the company looks set to sharply boost sales in 2011 and 2012, gross profit margins may be so low that the company's operating losses fail to shrink. The key for a turnaround in this stock is a path to eventual profits. And until investors can see that path, shares are unlikely to rebound much.

Echelon (Nasdaq: ELON)

In the last decade, this company emerged as one of the most promising plays on energy efficiency. The company developed a range of remotely-monitored electricity meters and industrial controls that opened the door for much greater control of energy consumption. For example, utilities could use the devices to control when air conditioners cycled on and off.

For a while, Echelon's shares were in favor as the company secured a large contract for wireless electric meters with a large Italian utility. Shares hit nearly $30 in late 2007 (when sales grew +140%) but now trade for less than $10. Blame it on the income statement. Sales fell in 2008 and 2009 and are likely to grow only modestly this year. Investors have come to view this company as filled with false promises.

But Echelon may be getting a second wind. The company has recently released a range of new products that allow manufacturers to build "smart-grid" controls right into their products. That will allow the electrical grid to talk straight to the device and allow for more control over energy consumption at times of peak energy usage. That's exactly the plan in place for the coming wave of electric cars that will need to re-charge their batteries when it is most convenient for the utility.

Echelon fits well into my approach of "love them when they're hated." The company's recent stumbles have left many investors dubious and perhaps discounting the company's future prospects. Yet those prospects remain bright. To be sure, the company will have to start generating real sales traction for shares to rebound.

Right now, analysts expect sales growth to climb back to +20% in 2011 and again in 2012. Yet many investors will wait to see if that forecast actually materializes. Growth forecasts have needed to be ratcheted down many times in the past. As is the case with A123 noted above, Echelon needs to prove that it can move into the black. The company has not made a profit since 2004. This stock should be on your radar, even if it's not a compelling buy just yet.

Broadwind Energy (Nasdaq: BWEN)

The wind energy market hasn't developed as quickly as the solar energy market, leading many industry players to issue downbeat sales forecasts. Broadwind Energy, which makes wind towers, gears and other equipment, has had an especially tough go if it, and a slow slate of new orders is expected to lead to a -23% drop in sales this year. Shares have fallen from $10 to a 52-week low of $1.42, before a recent rebound to $2.15.

Why the rebound? Rumors abound that GE (NYSE: GE) is looking to buy the company to further penetrate the wind market. Shares also received a lift from recent news that Google (Nasdaq: GOOG) and other firms are joining forces to build a massive $5 billion offshore wind farm near Delaware, giving the industry fresh credibility. With prospects for climate legislation pushed out into 2011 -- at the earliest -- shares may lack catalysts in the near-term, that GE rumor aside.

Energy Conversion Devices (Nasdaq: ENER)

Talk about low expectations. This company has stumbled so badly that industry watchers have hardly anything positive to say about it. Of the 13 analysts that follow it, not a single one has a buy rating. And Energy Conversion Devices is a favorite of short sellers, with more than 11 million shares held short, even after its shares have fallen from $70 in 2008 to a recent $5.

Why all the animus? Blame it on a broken business model. Energy Conversion Devices spent heavily to build massive factories to produce a large amount of solar equipment, only to find that competitors' technologies were more cost effective. So, the company sports wafer-thin gross margins and can't seem to trim stubbornly high operating losses.

With all that gloom, is this a short candidate? Well, it's getting crowded out there, and every time short sellers get spooked by a healthier stock market, they look to trim short position in names like this one. That's what happened when shares ran from $3.80 to $5.60 in July and August, and it may be happening again now as shares have risen more than +10% in the last five trading sessions.

Bank Hapoalim recently initiated coverage on Energy Conversion Devices with a paltry $1.50 target price. But it's probably safer to short this stock when the rest of the market is falling as well, so you don't have to worry about short covering.

A-Power Energy (Nasdaq: OTC:APWR)

This China-based supplier of wind turbines, energy distribution systems, power plants and water conservation systems has been a great growth story, boosting sales from $40 million in 2004 to more than $300 million last year. But that top-line growth hasn't always translated to the bottom line, as rising expenses have forced down operating margins in the past few years. But shares are really in the doghouse due to a lack of confidence in management, which seems to alter the company's forecasts every quarter.

At the end of 2009, the company blew past forecasts, but issued weak guidance. In the next two quarters, the company badly lagged estimates, but issued fairly robust guidance. And on a full-year basis, profits are falling in 2010, but are expected to rebound sharply in 2011. That pattern has played out for much of the last five years.

Investors don't like that kind of erratic behavior. So shares trade for less than half the 52-week high and just seven times next year's profit forecasts.

But, investors may be mistaken by focusing so closely on erratic quarterly results. If you take a step back, you'll notice that A-Power has become a favorite of the Chinese government, continually securing new contracts that should help sales keep growing at a solid clip. New contracts are also being signed in Vietnam, Thailand and Pakistan. This is a stock for strong stomachs, and when it posts the occasional rally, you should always think about booking profits as future results will also be erratic.

And the winner is... A-Power -- by a small margin.

Echelon looks awfully tempting, as the company is currently unloved and investors may be overlooking the intriguing slate of new products. Both of these stocks carry risks, so you may want to start with a small position and build over time as the companies prove their ability to steadily boost sales and profits (or in the case of Echelon, at least move toward profitability).

Broadwind is a curious play. If the GE buyout rumors fail to materialize soon, then shares may slip back toward the $1.75 mark. Then again, any further improvement in sentiment from investors about wind stocks is likely to re-focus attention back on this name. It's a high-risk/high-reward play.

Disclosure: Neither David Sterman nor StreetAuthority, LLC hold positions in any securities mentioned in this article.

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Source: Five 'Green' Stocks Set to Rebound