Ride the bailout wave

Avoid: Green energy
Buy: Old energy

The white house says "going green" will be a major policy priority. So far, it has directed about $60 billion in stimulus funds toward initiatives such as solar and wind power. "The problem is you don't know which companies are going to be the big beneficiaries," says Steven Romick of the FPA Crescent Fund. Similar to the explosion of dotcom companies in the late '90s, there are now hundreds of small green players - all competing for this money. And it's impossible to tell which ones will survive. What's more, big oil outfits like BP and Exxon Mobil are also dabbling in alternatives.

If you want to put more green in your wallet, focus instead on fossil fuel. Old energy stocks are cheap. The price/earnings ratio on oil shares has fallen 13% since the start of the year to 5.6. P/Es for green energy, meanwhile, have more than doubled to 26.9. Also, if stimulus works, global demand for energy will spike as economies recover. And alternative sources aren't enough to fill that demand, says Brad Sorensen with the Schwab Center for Financial Research.

Indeed, even as green energy use is expected to soar in the next decade, so is reliance on fossil fuels. The U.S. Energy Information Administration forecasts that in 2020, oil, natural gas, and coal will account for 86% of global energy use - the same as today. No wonder David Spika of Westwood Holdings concludes, "There's going to be a bigger opportunity to make money in traditional energy than in alternatives."

How to invest: iShares Dow Jones U.S. Energy Sector Index is an ETF that invests in fossil-fuel stocks found in the Dow Jones U.S. Oil & Gas Index.

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