NEW YORK (AP) - Some alternative energy stocks got a boost Wednesday as Morgan Stanley initiated coverage of the broad sector with an ``Attractive'' rating, saying investors should diversify clean-energy holdings to minimize short-term risk.
``We have just entered the second of four waves of clean energy innovation that will span the first two or three decades of the 21st century,'' said analyst David Edwards in a Wednesday report.
Investors should select companies that are secure, growing at an appropriate pace, controlling costs and providing the most environmentally friendly products, Edwards said. However, he warned that investors need to be ``agile'' as stocks will experience near-term volatility as these newer companies ``right-size and experience growing pains.''
One of the industries experiencing those so-called growing pains is ethanol. Several companies have halted plans to build new plants amid an oversupply of the alternative fuel, which has brought prices down sharply even as the cost of its main ingredient, corn, continues to climb.
Last week a small producer in North Dakota became the first to shut down production at an existing plant, according to a Raymond James report Wednesday. The firm noted it ``cannot rule out'' that other shut-downs have occurred, but says Alchem Ltd. was the first to publicly report its production halt.
Analyst Pavel Molchanov estimated that at current ethanol and corn prices, a typical U.S. ethanol producer is generating a loss of 6 cents per gallon before interest, taxes, depreciation and amortization.
Three of the four U.S. stocks Edwards rated ``Overweight'' led sector gains in midday trading. The diverse group includes Fuel-Tech Inc., which makes technology to reduce air-pollution. The stock gained $4.13, or 14.4 percent, to $32.87. Solar-module maker First Solar Inc. gained $8.17, or 5.9 percent, to $147.10, while shares of ethanol producer Verasun Energy Corp. rose 41 cents, or 3.5 percent, to $12.03.
Edwards' fourth top-choice, solar-product maker SunPower Corp., saw shares rise $1.73 to $93.53.
