My Top 2 Stocks: SunPower Corporation (SPWR) and Apple Inc. (AAPL)

Oversupply has plagued the industry over the past two years but a few companies are starting to emerge from the rubble. SunPower Corporation (NASDAQ:SPWR) has seen margins improve over the past year because its more efficient panels can command a premium over commoditized Chinese panels. Quality and bankability also give the company an advantage over rivals. Just look at the margin trends below, which show deterioration among Chinese competitors and improvement at SunPower Corporation (NASDAQ:SPWR).

Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012
SunPower 11.3% 12.7% 15.1% 14.1% 18.7%
First Solar 20.9% 15.4% 25.5% 28.4% 27.3%
Trina Solar 7.1% 5.8% 8.4% 0.8% 1.9%
Yingli Green Energy 3% 7.8% 4.6% -22.7% 8.5%

Source: Company earnings releases.

Note: All gross margin numbers are comparable on a company level. SunPower Corporation (NASDAQ:SPWR)‘s gross margin is non-GAAP because systems business creates volatile margins quarter to quarter.

Wall Street is just starting to believe in the power of the sun and SunPower Corporation (NASDAQ:SPWR) is seen as one of the clear winners, for the reasons I discussed above. The stock is already up 98% this year, but I think there’s a lot more to come. In a very simple multiples analysis I did last month, I saw that a $30-per-share stock is very reasonable and $80 per share isn’t at all out of the question. Yes, I said $80 per share from $12 today. If competitors continue to go bankrupt and SunPower Corporation (NASDAQ:SPWR) is able to boost capacity at higher margins than it has today, even that price may not be enough.

This isn’t an investment without risk. Some of the largest solar module manufacturers have gone bankrupt in the past year alone. But a few companies will emerge from this industry and those that do will make investors a lot of money. That’s why SunPower Corporation (NASDAQ:SPWR) is one of the largest holdings in my portfolio.

The article My Top 2 Stocks: SunPower and Apple originally appeared on Fool.com and is written by Travis Hoium.

Fool contributor Travis Hoium manages an account that owns shares of Apple, Microsoft, and SunPower. He is personally short shares of Amazon.com, owns shares of SunPower and has the following options: long Jan. 2015 $7 calls on SunPower, long Jan. 2015 $5 calls on SunPower, and long Jan. 2015 $15 calls on SunPower. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw. The Motley Fool recommends and owns shares of Amazon.com, Apple, Google. It also owns shares of Microsoft.

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