Solar Stocks to Buy: Three Companies Poised for Rebound

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The majority of investors, when considering stocks to buy, have given up on solar companies.

That's mostly due to a two-year beatdown of the sector and plenty of bad publicity from the demise of federally subsidized Solyndra.

But while the sector continues to suffer - more solar companies will likely go under in 2013 - a choice few are positioned to benefit from a rebound that will start this year.

One sure sign of better days ahead is that the sector has recently attracted interest from one of the world's most respected investors, Warren Buffett.

Just within the past month MidAmerican Energy Holdings Co., a subsidiary of Buffett's Berkshire Hathaway Inc. (NYSE: BRK.A, BRK.B), announced a deal to pay SunPower Corp. (Nasdaq: SPWR) between $2 billion and $2.5 billion for two California solar projects.

That followed MidAmerican's purchase of a 49% stake in an Arizona solar plant jointly owned by NRG Energy Inc. (NYSE: NRG) and First Solar Inc. (Nasdaq: FSLR), as well as the $2 billion purchase of a planned solar farm in San Luis Obispo, CA, also from First Solar.

Here's why Buffett has taken an interest.

Why Solar Stocks Will Bounce Back

Solar power has continued to grow in popularity even while solar companies have struggled.

According to the Solar Energy Industries Association (SEIA), U.S. solar installations grew from about 1.9 gigawatts in 2011 to 3.2 gigawatts in 2012. SEIA projects growth to nearly 4 gigawatts in 2013 and nearly 8 gigawatts by 2016.

Such growth hasn't helped solar stocks because oversupply of photovoltaic (PV) technology, which converts sunlight into energy, has kept prices falling, eroding profits.

That situation figures to improve in 2013.

"Prices will stabilize by the middle of next year," Glenn Gu, a senior PV analyst on price analysis for IHS Solar solutions, wrote in the IHS Solar Whitepaper for 2013.

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